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Unless the asset is an item of income in respect of a decedent (e.g., IRAs and other retirement plans, certain sales proceeds, compensation, etc.), then the asset gets a stepped up basis (or a stepped down basis if the assets fair market value is less than its basis in the hands of the decedent). The step up (or down, as the case may be) is to the fair market value on the date of death. In some cases where there is estate tax payable, an executor may choose alternate valuation of all of the estate's assets as of the date six months after the date of death, if that alternate valuation would cause less estate tax to be payable.

There are situations in which the estate (or trust, as the case may be) will have to pay a capital gains tax on funding a bequest, i.e., when assets are transferred to the beneficiaries, but only on the gain that has occured since death. That occurs when the distribution is in satisfaction of a specific pecuniary (monetary) amount.

So, say that your Uncle Bob's will says, "I leave my nephew Bill Smith $50,000." Uncle Bob owns 1,000 shares of XYZ, Inc. which he bought for $10/share. At the time of his death, they were valued at $45/share. The executor of Uncle Bob's will decides to satisfy the bequest to you with XYZ, Inc. stock, which is trading at $50/share on the day he distributes them to you. So, he distributes all 1,000 shares to you. The estate has a $5,000 capital gain. If the distribution took place in the year of termination of the estate, then that $5,000 gain will be part of the "distributable net income" of the estate, which, along with all of the DNI of the estate, will be apportioned among the beneficiaries who received assets from the estate.

As for basis with regard to assets owned by the decedent and another as joint tenants with right of survivorship, the answer depends on whether the other owner was the decedent's spouse or someone else. If the spouse is the surviving joint owner, then the asset gets a 1/2 step up in basis. If someone else, then the asset's basis is stepped up to the extent that the decedent contributed to the purchase of the asset.
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