General Rule
Under IRC § 1014(a) the general rule applied to property a beneficiary receives from a benefector is that the beneficiary's basis equals the fair market value of the property at the time the decedent dies. For example, Decedent owns a home they originally purchased for $35,000. Their basis in the home is equal to its cost, $35,000, assuming no adjustments under IRC § 1016. On the day Decedent dies, the fair market value of the home is $200,000. If Decedent bequeaths the home to Beneficiary, Beneficiary's basis in the home will be the fair market value, $200,000. In contrast, had Decedent given the home to Beneficiary before their death, Beneficiary would receive a carryover basis, which would be equal to the decedent's adjusted basis in the home, $35,000.
Read more about this topic: Stepped-up Basis
Famous quotes containing the words general rule, general and/or rule:
“In truth, a mature man who uses hair-oil, unless medicinally, that man has probably got a quoggy spot in him somewhere. As a general rule, he can’t amount to much in his totality.”
—Herman Melville (1819–1891)
“The tremendous outflow of intellectuals that formed such a prominent part of the general exodus from Soviet Russia in the first years of the Bolshevist Revolution seems today like the wanderings of some mythical tribe whose bird-signs and moon-signs I now retrieve from the desert dust.”
—Vladimir Nabokov (1899–1977)
“As a rule we develop a borrowed European idea forward, and ... Europe develops a borrowed American idea backwards.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)