Hold Appreciated Stock Until Death: How One Family Avoids $320,000 in Capital Gains Tax

18 hours ago 1

Ian Cooper

Fri, June 12, 2026 astatine 9:41 AM CDT 5 min read

Quick Read

Under IRC §1014, heirs inherit appreciated assets astatine just marketplace worth astatine death, erasing embedded gains and redeeming 1 household astir $290,000 successful taxes.
Selling $1.3 cardinal successful gains during beingness triggers astir $320,000 successful combined national and authorities taxes that holding until decease eliminates entirely.
Spend accepted IRA and 401(k) funds earlier touching appreciated brokerage shares, since pre-tax accounts ne'er person a step-up successful basis.
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A joined mates successful their precocious seventies sitting connected $1.6 cardinal successful a taxable brokerage account, with a outgo ground of conscionable $300,000, faces a quiescent but costly determination each clip they deliberation astir backing a room remodel, a caller car, oregon a agelong trip. Selling the appreciated shares feels logical due to the fact that that is wherever the wealth is. The taxation code, however, treats those aforesaid shares precise otherwise depending connected whether they are sold during beingness oregon held until death.

Three people, an older Black mates and a fiscal advisor, beryllium astir a circular woody table. The antheral advisor, seen from the back, wears a grey suit. The antheral client, with a grey beard, wears a plaid garment and gestures towards a papers portion looking astatine the pistillate client, who has dreadlocks and smiles, holding different document. A metallic laptop, a achromatic question mug, a tiny greenish plant, and a smartphone are disposable connected the table.

This is the concern thousands of retirees stumble into without realizing the cost. On forums similar Bogleheads and r/personalfinance, you tin find near-identical posts from big children asking whether ma and dada should merchantability down the aged Exxon, GE, oregon scale money presumption to wage for assisted living. The intuitive reply (sell what you have, sphere the IRA) is usually backwards.

The numbers down the determination

Ages: 78, joined filing jointly
Taxable brokerage value: $1.6 cardinal
Cost basis: $300,000
Embedded semipermanent gain: $1.3 cardinal
Core question: merchantability to spend, oregon clasp for heirs?

Why IRC §1014 is the full ballgame

The azygous regularisation that dominates this determination is the step-up successful ground nether IRC §1014. When an proprietor dies, the outgo ground of astir superior assets resets to the just marketplace worth connected the day of death. Heirs inherit the shares astatine that caller basis. Decades of embedded summation simply vanish for taxation purposes.

The mathematics is blunt.

If this mates sells the $1.3 cardinal of summation during their lifetime, they look astir 15% to 20% national semipermanent superior gains tax, positive the 3.8% nett concern income tax, positive authorities taxation (assume 5%). Combined bill: astir $320,000. If they clasp instead, heirs merchantability the aforesaid shares the adjacent week astatine zero gain. After accounting for astir $30,000 of further estate-related friction, the nett household savings are astir $290,000.

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