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Your basis can increase for a variety of reasons, for example, by purchase of additional shares or reinvestment of dividends. The term "stepped-up basis" is usually used in the context of inherited stock. Generally, when a shareholder dies, the basis of stock he or she owns is stepped up to fair market value at the date of death. In most cases, the person inheriting the stock can use this stepped-up basis to compute any gain or loss on subsequent sales.
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