FAQ: How to Record Step up Cost Basis in Event of Death
My spouse recently passed. We have a joint investment account with various stocks and mutual funds. I need to record a new "stepped up" cost basis for each of them and wanted to verify how. I logically concluded (before reading any answers on the forum) that the only way is by "Removing the appropriate number of shares" and then "Adding them back with the date of death and new market cost basis". By all the reading, it would appear that this is the only way to accomplish it. I would appreciate confirmation that this is the correct method.
Then not realizing any of the cost basis dilemma, I did a transfer of shares between her IRA and my IRA for 1 security. So it transferred all the original data from her account to mine. Again, I am searching for the correct method to fix this. Do I have to edit each transaction? or Can I simply do the Remove/Add shares transactions? Will all reports such as capital gains reflect the correct information depending on which to use? (I don't think you can reverse the transfer between accounts transaction either to undo it if necessary).
On this note as well, how important would it be to change it in a IRA? I am told that any withdrawals from an IRA for pretaxed contributions are treated as ordinary income. So there would be no need to calculate capital gain/losses.
It would be most appreciated if the methods described above can be confirmed as the proper way to go and I thank any member that responds for his/her information & suggestions