Generally, the property you inherit from a decedent receives a “step-up” (increase) in basis equal to the fair market value of the property at the time of death. The step-up is potentially valuable as it allows the beneficiary to avoid paying capital gains tax on any appreciation in the value of the asset prior to the decedent’s death upon the future sale of the inherited property. However, when it comes to inheriting shares of stock in an S corporation, beneficiaries can be hit with a significant tax bill if they are not careful about selling property owned by the corporation.
