What Does Stepped-Down Basis Mean In Estate Planning?
Same as the stepped-up basis except the asset has gone down in value since it was purchased. The new owner would take that asset with a new lower (stepped-down) basis. This depends on the value as of the date of death of the owner compared to the price the owner originally purchased the asset.
Example Of Stepped-Down Basis In Regards To Estate Planning
Dad was convinced that AOL was going to make a comeback. He bought it for $50,000 and it’s now worth $5,000. Instead of selling his AOL stock at a loss during his lifetime he held onto it. I now own it with a basis of $5,000.