Step-Up in Basis is IRC 1014

Added: 2026-05-16

[00:00:00]So step up in basis is IRC 1014. So it is basically saying on death the asset will be moved to fair market value. Now, what does that mean? That's not just a step up. That's actually also a step down in basis, which we don't talk about very often because a lot of assets go up over time, but there's actually a downside there if it you'd get a step down in basis if the fair market value is now lower at your death. So how this applies based on the type of tax entity, if you have a single member LLC, it's disregarded for federal income tax purposes, which means it's just the asset going to be stepped up or stepped down. If you have a partnership, you usually have to make a tax election, so 754 election. If you have a corporation, the stock is what gets the step up or step down, and then the underlying asset wouldn't. Now, what you can do to fix that a lot of times is if you've got the assets inside and you're going to completely liquidate, a lot of times you can get a net benefit that equals it because you've got the stepped up stock basis even if there is a gain that generates on sale. It varies like how it's implemented, but that's the general premise. In fact, you'll tax off from a tax attorney to get that.