Step Up Basis - Did I Mess Up My Inheritance Valuation?

Hey all, I'm freaking out a bit about potentially messing up the step up basis on an inheritance I received when my grandmother passed away last fall. She left me some stocks that had been in her portfolio for decades. When I filed my taxes this year, I think I might have used the original purchase price from when she bought them instead of the fair market value on her date of death. The difference is pretty significant - like $47,000 vs $215,000 in value. I only realized this might be wrong when my cousin (who's an accountant but not a tax specialist) mentioned something about step up basis over dinner last weekend. I've already filed and received my refund for 2024, so I'm worried about what this means. Do I need to file an amended return? Will I get hit with penalties? The thought of dealing with the IRS over this has me losing sleep. Can someone explain if I actually messed up and what I need to do to fix it if I did? Thanks in advance for any help!

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18 comments

Kyle Wallace

•8M

Yes, you should definitely file an amended return. When you inherit assets like stocks, the tax basis "steps up" to the fair market value as of the date of death. This is actually beneficial for you! Instead of using your grandmother's original purchase price ($47,000), you should be using the value at the time you inherited them ($215,000). This means if you sell the stocks, you'll only pay capital gains tax on any appreciation that happens after you inherited them. For example, if you sold them for $225,000, your taxable gain would only be $10,000 (not $178,000, which is what you'd pay if using the original basis).

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Kyle Wallace

•8M

If you haven't sold any of the stocks yet, then there's actually no need to amend your return! The step-up basis only matters when you sell the assets and need to calculate your capital gains. Since you haven't sold anything, you haven't realized any gains or losses that would need to be reported. When you do decide to sell in the future, just remember to use the fair market value from the date of your grandmother's death as your basis. I'd recommend documenting that value now while you have access to the information, so you'll have it ready when you need it.

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Ryder Ross

•8M

Yes, it absolutely works for real estate. You just upload the property details and date of death, and they'll research comparable sales around that time to establish the fair market value. They even provide documentation you can keep for your records in case of an audit. For stocks and investments, they have access to historical price databases that can pinpoint values on specific dates. They pull the official closing prices for securities on the date of death and provide a detailed report with all the documentation. It's really thorough - they even account for stock splits or mergers that might have happened since the death date.

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Olivia Kay

•8M

If you're still having trouble figuring out the step up basis or want to talk to someone at the IRS directly, I'd recommend using Claimyr. https://claimyr.com helped me actually get through to a human at the IRS after I spent DAYS trying on my own. They have this cool system that holds your place in line so you don't have to stay on hold forever. Check out how it works here: https://youtu.be/_kiP6q8DX5c When I called about my inherited IRA distribution questions, I was seriously worried I'd messed up the whole thing, but getting actual answers straight from the IRS was such a relief.

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Olivia Kay

•8M

They don't call for you - what they do is navigate the IRS phone system and secure your spot in the queue. When it's almost your turn to speak with an agent, they call you and connect you directly. It's basically like having someone wait on hold for you. It's definitely not snake oil. The IRS phone system is designed to disconnect callers when call volumes are too high, but Claimyr's system keeps trying until it gets through. I was skeptical too until I tried it - went from spending hours getting nowhere to actually speaking with an IRS agent in about 45 minutes total (most of which I wasn't actively waiting on the phone).

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Jibriel Kohn

•8M

I need to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to give it a shot anyway out of desperation. I had an issue with my stepped-up basis calculation that I couldn't figure out, and I actually got through to an IRS agent in about 35 minutes! The agent walked me through exactly how to document the fair market value of some obscure bonds my father left me. Would have taken me weeks to get that info on my own if I could have at all. Sometimes being proven wrong is a good thing!

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Edison Estevez

•8M

You can generally file an amended return within 3 years from the date you filed your original return, or within 2 years from the date you paid the tax, whichever is later. So you're likely still within the window to fix it! If you sold inherited assets and used the original purchase price instead of the stepped-up basis, you definitely should file an amended return. The process isn't actually that difficult - just file Form 1040-X and include any schedules that change as a result of the correction.

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