Stepped Up Cost Basis in Joint Accounts

by | Aug 18, 2014 | Videos, Asset Management

Last week we discussed the cost basis of inherited stock on the Mullooly Asset Management video. If you missed it, check it out here:

That video led to a very good question from one of our viewers. Their question was, “What happens to the cost basis of stock held in a joint account when one of the account’s owners passes away?”. Tom explains precisely how stepped up cost basis is determined in this joint account scenario.

Tom walks through an example on our office board in the video. The visual aspect makes this easier to comprehend. What you need to remember is that the original cost basis of stock held in a joint account is split evenly (50/50) between the two account owners. When one of them passes away, their half of the stock receives a stepped up cost basis equal to half the date of death value. The other half of the stock (owned by the survivor) retains its original cost basis. The two totals are added together to give the survivor their new, partially stepped up cost basis. Again, we recommend following Tom’s example on the board because it is much simpler to follow.

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