Inherited Stock

DEFINITION of 'Inherited Stock'

A stock that an individual obtains through an inheritance after the original holder has died. The cost basis for the stock is based on the market value of the security upon the donor's death. If the stock value increased during the time it was held by the deceased, its cost basis is "stepped up" when ownership is transferred .

BREAKING DOWN 'Inherited Stock'

Unlike gifted securities, for tax purposes, the security is not valued at its original cost basis. Only the appreciation from the day of inheritance is subject to a capital gains tax.

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RELATED FAQS
  1. How do I determine capital gain or loss for stocks held in excess of 20 years?

  2. How is cost basis calculated on an inherited asset?

    Understand how the cost basis for stocks, property and other inherited assets is calculated, and the resulting tax implications ... Read Answer >>
  3. Can I utilize the 1035 exchange provision for an annuity I inherited?

  4. I received a small inheritance last year, will it affect next year's social security?

    I received social security - $13,000. That is all my income. Nothing else. I received $22,000 in inheritance, lump sum, last ... Read Answer >>
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