Account Types
An investor inherits stock purchased by the decedent for $10,000. At the date of death, the stock is worth $50,000. What is the heir's cost basis?
The heir receives a stepped-up cost basis equal to the fair market value at the date of death ($50,000). If the heir later sells for $55,000, the taxable gain is only $5,000, not $45,000. This is a significant tax benefi
Complete Analysis & Legal Rationale
The heir receives a stepped-up cost basis equal to the fair market value at the date of death ($50,000). If the heir later sells for $55,000, the taxable gain is only $5,000, not $45,000. This is a significant tax benefit of inherited assets versus gifted assets, which use carryover basis.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.