If I inherit stocks that went up since they were originally purchased, they assume a cost basis of the value on the day I inherit them. So I can sell them and pay no capital gains tax.
Suppose the price went down since they were originally purchased. If I sell them, does the cost basis also step down, so that I cannot take a loss? (I know the loss can only be used to offset gains.)
I don’t know but I should learn this since I’m certain any securities I inherit will likely reflect a mortifying loss that my father couldn’t let go of.
Correct. The basis is the FMV when you inherit it. If it is a large enough amount and the death was not sudden, there may be ways to realize that loss before the death. For example by SELLING it to the beneficiary and taking back a note. The note becomes part of the estate.
I AM NOT AN (YOUR) ESTATE PLANNER. Don’t rely on my comments as advice.