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Hi and welcome to Just Answer!When any asset is transferred to the GRAT - there is no stepped up basis - only inherited assets are getting stepped up basis. Generally the GRAT is set as a irrevocable trust - which is a separate legal and taxing entity - so trust's basis on the transferred asset is the lesser of donor's basis and the fair market value (FMV) of that asset at the time of transfer. Thus in your example - that is the lesser of $9500 and $10100 - which is $9500.Also - because donor's basis is transferred - the donor's holding period is also transferred. Thus if the GRAT sells (or otherwise disposes) that asset above $9500 - that will be long term capital gain.Interest paid by bond will be taxes separately as interest income.