stepped-up basis

Definition

The readjustment of an asset's value for tax purposes when inherited, eliminating capital gains tax on appreciation that occurred during the deceased's lifetime. It's the tax code's way of saying 'fresh start' while making estate planners very wealthy.

Example Usage

Thanks to stepped-up basis, the heirs sold the appreciated stock immediately without owing capital gains tax, legally erasing decades of gains for tax purposes.

Origin

U.S. tax code provision dating to 1920s, survived numerous reform attempts

Fun Fact

Stepped-up basis is worth billions to wealthy families and is why estate planning attorneys earn their fees—it's arguably the largest tax loophole still widely available.

Source: U.S. tax code and estate planning terminology

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