When my father passed (in 2018), he left a brokerage account with several securities. These securities were split between myself and my brother and are currently held in separate brokerage accounts at the same brokerage.
It’s my understanding that the cost basis of these securities should be adjusted to reflect the price at the time my father passed.
I requested that the broker make these adjustments for all of the securities several years ago, and yet the basis remains the same in both accounts as it was when my father died.
I again made the request in mid October of this year, and almost two months later, the cost basis of all securities remains the same, with no step-up/down of the basis.
My question is, is there some sort of law/rule that requires brokerages to make this adjustment when it is requested? I know that it was made a requirement for brokerages to report the cost basis of securities back in 2013, so I was wondering if there was any part of this law that requires them to step-up the cost basis when they transfer brokerage accounts from the decedent to the beneficiaries or at least when requested to do so?
https://www.finra.org/investors/insights/cost-basis-and-your-taxes
I don’t believe brokers have a duty to report the stepped up basis, the heir does (but I could certainly be wrong and I’m sure someone will tell me)
In any case you are ultimately responsible for tracking your own basis. The basis is the average of the high and low price on the day of death – you should determine what those were and keep the record of the basis somewhere you will remember.
You can adjust the cost basis when you report the sales on Form 8949 ([instruction](https://www.irs.gov/instructions/i8949#en_US_2021_publink10004599)). If the IRS asks you why you changed those numbers, you tell them about the inheritance. Also be sure to write [“inherited” in date acquired](https://www.irs.gov/instructions/i8949#en_US_2021_publink1000306805). Sale of inherited asset is always treated as long term gain/loss.
The broker is not required to draw legal conclusions about your tax basis. In some ways, they are forbidden to do so.
The same “problem” comes up with things like RSUs, where the broker will report a cost basis of $0 because doing otherwise would mean drawing a conclusion about your tax situation that they technically are not certain of. Technically.
When I had to do this a while back, I was able to ask the brokerage to calculate the values of all holdings at the time of death. They did so, although it was actually done by a third-party company that apparently they contract with to do such things. That third-party company sent me a nice report listing all holdings and what the high/low/mean values were on the date of death.
However, the brokerage did not change anything in their records. I don’t think they are required to do so. In fact, the cover letter that they sent me with the report said the following:
*Valuation information is provided by a third party valuation service provider. We do not warranty the accuracy of this information for any particular purpose. In addition, we do not provide legal or tax advice. Consult with an attorney or tax professional regarding any specific legal or tax situation. We hope this information is helpful.*
I asked my mother-in-law’s broker to generate a market value report of her holdings as of the date of her death and we’ve set it aside for tax time. We liquidated those assets after they had transferred into my wife’s name and we will get a capital loss to offset against the gain from the sale of her house. (House not fully stepped up because reasons).
In certain inheritance, like irrevocable trust, retain the cost basis. Otherwise cost basis is at the time of death. So your cost basis should be 2018 unless his estate had a legal transfer vehicle in place to retain cost basis
The brokerage should do it when the account is transferred from the decedent’s name to the estate or from the estate to the new owners who inherit it. If the account hasn’t been transferred yet, they wouldn’t usually have adjusted the basis.
However, this basis step up does not apply to a retirement account, so if this is a retirement account, no step up.
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I needs to spend some time learning much more or understanding more.