If you’re planning your estate, or you’ve inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. For example, if your grandfather bought stock in 1935 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of your grandfather’s heirs — and all of that gain escapes federal income tax forever. A “step-down” occurs if someone dies owning property that has declined in value. Contact us for tax assistance when estate planning or after inheriting assets.