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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29774
Experience:  Taxes, Immigration, Labor Relations
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My client is a resident of the United States. She inherited

Customer Question

My client is a resident of the United States. She inherited shares in a British Company. The particular details are as follows:

Grandfather established a trust containing shares in the British Company. Aunt had a lifetime beneficial interest in the trust. On the death of the aunt, the assets of the trust were aggregated with the estate of the Aunt only for British Inheritance Tax purposes. The inheritance taxes on the shares and the free estate of the aunt were paid. Client receives the shares six years after the death of the aunt and promptly sells the shares to the company.

She has no capital gains taxes in the U.K.

Question: for purposes of U.S. taxes, what is the basis price of the shares? Is it the price paid by the grandfather or was it the valuation price as at the date of death of the aunt.

Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.


Hi and welcome to Just Answer!


The basis of shares for capital gain determination is the fair market value at the time the aunt died. Because the property was acquired via inheritance - there is a stepped up basis.


Let me know if you need any help or clarification.

JACUSTOMER-1xgz5iop- :

Thank you for your response. I knew as much.

JACUSTOMER-1xgz5iop- :

The issue that has been raised is as follows: since the shares, which were in the trust of the grandfather, were aggregated with the free estate of the aunt is the basis price that of the grandfather or the value of the shares as at the time that the aunt died.


If you client became an owner of these shares any different way - not as inherited - that we need to know - if that was a gift, purchase, or any other way. Depending on that there might be different determination of the cost basis,

According to your information - your client acquired shares from the aunt as a result of her death - thus via inheritance. Stepped up basis for inherited property is generally determined as a the fair market value at the time the decedent died.