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I have always used the stock or mutual fund's closing price on the date of death. If the individual dies when the markets are closed, the next market day's opening price is usually used.

If the security has dropped in price, the basis of the inherited security will 'step down'. So although the family may not be thinking about this as the owner nears death, it is a good idea to sell securities whose basis is greater than the market value....if this is possible.

A couple of other points on this topic:

Securities that step up (down) are always inherited as "long term", meaning if you inherit, say, 100 shares of IBM today and sell them in 3 months at a gain, it will be a long term capital gain.

Some securities do not step up at death. Securities within a tax deferred account, such as an IRA, retirement plan, deferred annuity, 529 plan or HSA are examples. In addition, any inherited stock acquired from an NUA election does step up, but the NUA will be taxed at the capital gains rate when the stock is sold by the beneficiary.

BruceM
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