How-to / IRC § 1014
How to Capture the Step-Up in Basis
Assets included in a decedent's estate receive a basis step-up to fair market value at death — wiping out built-in capital gains for heirs. Here's the five-step planning playbook.
Reviewed by
Financial Freedom Librarian
Fiduciary Research Editor
J.D., LL.M. (Taxation) — supervising fiduciary review
Last updated
View all sources →Step 1
Confirm assets are includible in the gross estate
Only assets included in the decedent's gross estate under §§ 2031–2044 receive the § 1014 step-up. Irrevocable non-grantor trust assets generally do NOT step up.
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Step 2
Order date-of-death appraisals
Engage qualified appraisers to value real estate, closely held interests, art, and other illiquid assets as of the date of death.
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Step 3
Consider the § 2032 alternate valuation date
If estate value drops within 6 months of death, electing the alternate valuation date can lower estate tax — but it also lowers the step-up basis. Run the trade-off.
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Step 4
Report on Form 706 and Form 8971
File Form 706 (if required) reporting the date-of-death values. Issue Form 8971 / Schedule A to beneficiaries — the consistent basis rule of § 1014(f) binds them to the reported value.
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Step 5
Archive valuation evidence
Store appraisals, comparable sales, market data, and Form 706 workpapers. Anchor the bundle on Stellar so heirs can defend basis decades later.
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Statutes & authorities
- IRC § 1014 — Basis of property acquired from a decedent
- IRC § 1014(f) — Consistent basis reporting
- IRC § 2031 — Definition of gross estate
- IRC § 2032 — Alternate valuation date
- IRC § 6035 — Basis information reporting (Form 8971)