Step-Up in Basis
The reset of an inherited investment's cost basis to its market value on the date of the owner's death.
When someone dies still owning an investment, federal tax law generally resets its cost basis to the fair market value on that date. The heir can sell soon after and owe little or no capital-gains tax, because the gain built during the original owner's life is never taxed. It applies to assets the person owned outright, such as a brokerage account; a UTMA already belongs to the child, a 529 passes to a successor owner, and a Roth IRA has no basis to step up.
"When someone leaves you an investment, the tax rules treat it as if you bought it at today's price."
Want to go deeper? Step-up in basis, explained.
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