Strategic estate planning involving the step-up in basis rule allows heirs to inherit appreciated assets like AAPL and MSFT without the burden of the original owner's capital gains tax liability.
Mentioned as an example of highly appreciated stock where bequeathing provides a step-up in basis, avoiding capital gains taxes for heirs.
Mentioned alongside Apple as a deeply appreciated blue-chip stock illustrating the tax benefits of bequeathing over gifting.
Investors holding deeply appreciated blue-chip stocks like Apple and Microsoft can save heirs over $120,000 in capital gains taxes by utilizing the step-up in basis rule. By bequeathing shares at death rather than gifting them during one's lifetime, the cost basis resets to the fair market value, effectively erasing decades of embedded tax liability.
Under IRC §1014, when an individual dies owning appreciated assets, the cost basis for the heirs resets to the fair market value on the date of death, which eliminates the capital gains tax on the appreciation accumulated during the owner's lifetime.
No, retirement accounts such as Traditional IRAs, 401(k)s, and 403(b)s do not receive a step-up in basis and pass to heirs with their original tax character intact.