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Tax Hit Inherited Stock

s death, whether it has gained or lost value since he or she purchased it. If the stock is worth more than th...ll be able to deduct a $3,000 loss.


If the stock had lost value since the original owner purchased it, the basis is adjusted down to the value at death. That means you can’t write off the loss that occurred while he was alive. Say he bought the stock for $1,000 but it was worth just $500 when he died. Your basis will be $500. If the stock is worth $1,200 when you sell it, you’ll be taxed on a $700 gain.

All inherited stock qualifies for the lower rates on long-term capital gains, no matter how long you hold it -- even if you hold it for less than a year after your uncle’s death. Losses on the sale of your stock can offset gains on the sale of other investments dollar for dollar. If the losses exceed all of your capital gains for the year, up to $3,000 of the excess loss can be deducted against other kinds of income.

In most cases, the cost basis is set as the stock’s value on the date of the previous owner’s death, but sometimes the executor of a large estate who files an estate-tax return can choose to set the basis at the value six months after the owner died.

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