Chartered Retirement Planning Counselor (CRPC) Practice Exam 2026 - Free CRPC Practice Questions and Study Guide

The basis of stock acquired through inheritance is generally set at the fair market value on the date of the decedent's death. This is a specific tax concept known as "step-up in basis," which adjusts the value of an inherited asset to its current market value at the time of the decedent's passing, rather than the original purchase price paid by the decedent. This adjustment can provide significant tax advantages, as it reduces potential capital gains tax liability when the inheritor eventually sells the inherited asset.

For example, if a stock was originally purchased for $10 per share but has a fair market value of $50 per share at the decedent's death, the inheritor's basis for the stock would be $50. Upon sale, if the inheritor sells the stock for $60, only the gain above the $50 basis would be subject to capital gains taxes, thus potentially reducing the tax burden compared to if the basis were the initial purchase price. This principle helps to limit the tax impact on heirs, aligning the taxable gain with the increase in value that occurred during the decedent's lifetime.