<P> Because of this provision, any appreciation of the affected property that occurred during the decedent's lifetime will never be taxed . Thus, this provision provides an incentive for taxpayers to retain appreciated property until death, and sell property that has fallen in market value while alive (although it should be noted that property on which one may take depreciation may still cause a gain--even when sold for less its original purchase price--because depreciation subtracts from basis). </P> <P> Section 2032 provides an alternate method of determining the property's new basis . If the property is not disposed of within six months of the decedent's death, the executor may elect to use the property's fair market value six months after the date of death BUT ONLY IF SUCH AN ELECTION RESULTS IN A DECREASE IN THE VALUE OF THE GROSS ESTATE . If the executor does not so elect, or if the property is disposed of before the six months have passed, then the property will still assume a basis equal to its fair market value at the time of death . </P> <P> "Property acquired from the decedent" under IRC § 1014 (b) generally includes property acquired by "bequest, devise or inheritance", property the decedent gives to his or her estate, and certain revocable trusts . </P> <P> One possible explanation for the stepped - up basis rule under IRC § 1014 is to avoid the difficulty of ascertaining a decedent's adjusted basis in property that could have been held for decades . A second theory is that a decedent is not likely trying to evade taxes by passing property at death, so mandating carryover basis, which would preserve the gain in the beneficiary, is unnecessary . Third, the federal government imposes estate taxes on transfers of wealth at death based on those assets values as of that date . Were no step up in basis allowed, the federal government could potentially receive a windfall from estates subject to estate tax by recovering federal estate tax based on capital assets' values as of a decedent's date of death, while also receiving capital gains tax when such assets are sold by an estate or a beneficiary based on the difference between the value of the asset when sold and the price at which such asset was purchased by a decedent . </P>

How many times can you step up cost basis