10 May Will there be a step-up in basis for this inheritance?

Q. My sister, her husband, and I own an S Corporation with 25%, 25% and 50% ownership, respectively. The S Corporation invests in rental properties. My brother-in-law passed away earlier this year, so does my sister get a step-up in basis for her husband’s portion?
— Family business

A. We’re sorry to hear about your brother-in-law, and it’s kind of you to try to help your sister.

The basis of property inherited from a decedent is generally the fair market value of the property on the date of the individual’s death.

This is also referred to as a step-up in basis, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

In some instances, she said, the fair market value at time of death may be less than the decedent’s tax basis.

“Stock in S Corporations obtain a step-up in basis when inherited, whereas assets such as IRAs or annuities do not receive the step-up as such assets are considered income in respect of the decedent,” she said.

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This story was originally published on March 10, 2021.

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