Cost Basis: Inherited or Gifted Securities

What this video covers

• Why inherited securities always receive a basis stepped up or down to fair market value (FMV) at death, and how this wipes out decades of unrealized gains
• Why inherited securities are always treated as long-term, even if the beneficiary sells immediately, and how the exam traps you with short timelines
• When the alternate valuation date six months after death can be elected, and the strict requirement that it must reduce the estate's total value
• How the dual basis rule applies only to gifts of depreciated property (FMV at gift below donor's basis), creating two separate price tags for gains versus losses
• Why a depreciated gift sold at a gain uses the donor's carryover basis and tacked-on holding period, while a sale at a loss uses the gift-date FMV with a reset holding period
• What happens in the "no man's land" zone when the sale price falls between the donor's basis and the lower gift-date FMV: zero recognized gain or loss
• When the dual basis rule does not apply, namely when the gift-date FMV equals or exceeds the donor's basis, so the rules simplify to straightforward carryover basis