IRC §1014 · 26 U.S.C. §1014
IRC §1014: Basis of Property Acquired From a Decedent
IRC §1014 is the stepped-up basis rule — inherited property takes fair market value at death, wiping out the decedent’s unrealized gain. The exceptions (IRD, joint property) are where the planning lives.
What it governs
- Fair-market-value basis at the date of death (or alternate valuation date)
- Wipes out unrealized appreciation — the heir’s gain starts at zero
- Does NOT apply to income in respect of a decedent (§691: IRAs, unpaid wages)
- Joint and community property get their own basis adjustments
In the GuideFull treatment in Chapter 12 of the Guide (principal treatment) and Chapter 15 — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
Related sectionsIRC §1015 — gifts keep carryover basis, not a step-up · IRC §121 — the home-sale exclusion that pairs with basis planning
From the practiceStart the consultation — Paul on video, one question at a time →
Questions this section answers
- Do heirs pay income tax on inherited stock gains?
- No — §1014 steps the basis up to fair market value at death, so pre-death appreciation is never income-taxed. Sell the day after death and the gain is near zero.
- Does stepped-up basis apply to an inherited IRA?
- No — retirement accounts are income in respect of a decedent under §691, taxed to the beneficiary as ordinary income. §1014 never touches them.
- What is the alternate valuation date?
- The executor may value the estate six months after death under §2032 — but only if it lowers both the gross estate and the estate tax. The §1014 basis follows that election.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
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