Step-Up in Basis Explained

Why It Matters

Knowing whether a step‑up basis applies determines heirs’ future capital‑gains tax and influences trust design, directly impacting overall estate tax efficiency.

Key Takeaways

• Step‑up basis adjusts asset cost to fair market value at death.
• Irrevocable non‑grantor trusts may forfeit step‑up basis benefits.
• Step‑down basis applies when asset value declines before death.
• Estate tax savings often outweigh loss of step‑up basis.
• Consult tax professionals to navigate basis rules and trust structures.

Summary

The video explains the tax concept of step‑up (and step‑down) basis, which resets an asset’s cost basis to its fair market value at the owner’s death under IRC 1014. A step‑up eliminates future capital‑gains tax for heirs, while a step‑down applies when the asset’s value has fallen.

Key points include that an irrevocable non‑grantor trust can block the step‑up because the asset no longer resides in the decedent’s estate. The presenter notes that many use such trusts to avoid a potentially 40% estate‑tax liability, accepting the loss of a step‑up as a trade‑off. Conversely, if the asset’s value drops, a step‑down basis reduces the heir’s cost basis, increasing future gains.

The speaker emphasizes, “you didn’t die with the asset in your estate, so you won’t get the step‑up,” and stresses that estate‑tax savings often outweigh the capital‑gains benefit. He directs viewers to actualtax.com for deeper guidance.

For investors and estate planners, understanding when a step‑up applies is crucial for projecting heirs’ tax burdens and structuring trusts. Professional advice is essential to balance estate‑tax mitigation against potential capital‑gains exposure.

Original Description

🔥 Want to become Jasmine's client? Tax Planning & Returns, Accounting, and IRS Tax Resolution: https://jasminedilucci.com/discovery-call

🔥 Join my new FREE Actual Tax Law Community for Free Workshops, Q&A's and Tax Resources: https://actualtaxlaw.com/

🔥 Follow Jasmine on Instagram for daily content: https://www.instagram.com/taxleveragejd/

▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

ABOUT JASMINE DILUCCI, JD, CPA, EA

Jasmine DiLucci has specialized in tax since high school when she first became licensed to represent taxpayers before the IRS.

Now as a tax attorney and CPA, she works with individuals and business owners across the nation to on Tax Planning, CFO Advisory, and IRS Tax Resolution

How Jasmine Got Here…

18: Became an Enrolled Agent, licensed to represent taxpayers before the IRS.

22: Earned an Accounting Degree and a Master’s in Finance.

23: Became a CPA

24: Stepped into leadership as she took over her own CPA firm

26-28: Juggled full-time studies at SMU Law while she was growing her CPA firm.

28: Graduated from law school 4th in her class and became an Attorney, all while managing her CPA firm.

29-31: Expanded her CPA firm to seven figures, with a focus on delivering top-notch service and exceptional value to every client.

32: Launched Tax Leverage to offer free online education and combat the rise of “tax gurus,” aiming to provide real, accessible tax knowledge.

Today: She’s dedicated to running her firm and leveraging her expertise to educate and empower others, helping individuals and businesses navigate the complexities of taxes and finance.

▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

Disclaimer: This information on this channel is for educational purposes only and does not constitute professional legal or tax advice.

# # #jasminedilucci