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)
“In general I do not draw well with literary men—not that I dislike them but I never know what to say to them after I have praised their last publication.”
—George Gordon Noel Byron (1788–1824)
“When any practice has become the fixed rule of the society in which we live, it is always wise to adhere to that rule, unless it call upon us to do something that is actually wrong. One should not offend the prejudices of the world, even if one is quite sure that they are prejudices.”
—Anthony Trollope (1815–1882)