Business and Personal Finance Dictionary

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• STEP UP IN BASIS
  
  When you inherit assets, such as securities or property, they are stepped up in basis. That means they are valued at the amount they are worth when your benefactor dies, or as of the date on which his or her estate is valued, and not on the date they were purchased. For example, if your father bought 200 shares of stock for $40 a share in 1965, and you inherited them in 2001 when they were selling for $95 a share, they would have been valued at $95 a share. If you had sold them for $95 a share, your cost basis would have been $95, not the $40 your father paid for them originally. You would not have had a capital gain and would have owed no tax on the amount you received in the sale. In contrast, if your father had given you the same stocks as a gift, your basis would have been $40 a share. So if you sold at $95 a share, you would have had a taxable capital gain of $55 a share (minus commissions).
  
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