What Gets a Basis Adjustment When Someone Dies—and What Does Not?
Many capital assets included in a decedent’s estate receive a basis adjustment to date-of-death value, but not every inherited item does. The adjustment can be up or down.
What Matters Most
Income in respect of a decedent, such as certain retirement-account and accrued-income items, generally does not receive the ordinary §1014 basis adjustment.
Basis Can Move Up or Down
The common phrase “step-up” is incomplete. The general rule is a basis adjustment tied to date-of-death value, which can increase or decrease basis depending on the asset’s fair market value.
Keep Valuation Records
Appraisals, brokerage statements, real-estate valuations, and entity valuation support can become important years later when an inherited asset is sold. Basis consistency and Form 8971 issues may also matter in estates subject to the applicable reporting regime.
Why Professional Help Can Matter
Fiduciary taxation often depends on the governing document, ownership, timing, distributions, elections, fiduciary accounting, and state law. A qualified tax professional with actual estate-and-trust experience can help coordinate those moving pieces so requirements are fulfilled and unintended consequences are less likely.
Not Sure What Your Situation Requires?
Reviewed by Owen Arnoff, EA, NTPI Fellow
Reviewed: October 2026
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