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What is the cost basis of an inherited mutual fund

User Jpsecher
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I would like to explain the cost basis of an inherited mutual fund. When an individual inherits a mutual fund, the cost basis of the fund is adjusted to the fair market value (FMV) of the fund on the date of the original owner's death. This means that the cost basis of the mutual fund is not the original purchase price but rather the value of the fund at the time of the original owner's death.

This is important because when the inherited mutual fund is sold, the capital gains taxes are calculated based on the difference between the FMV of the fund on the date of the original owner's death and the sale price. If the inherited mutual fund is held for a long period of time, this can result in a significant difference between the original purchase price and the FMV at the time of inheritance.

It is important to note that if the inherited mutual fund is held for a period of time before being sold, the cost basis may be adjusted further based on any additional distributions or reinvestments made by the beneficiary. In such cases, the cost basis would be adjusted upward to reflect any additional gains that may have been earned by the fund.

In summary, the cost basis of an inherited mutual fund is the fair market value of the fund at the time of the original owner's death. If the fund is held for a period of time before being sold, the cost basis may be further adjusted to reflect any additional gains earned by the fund.

User Jdmayfield
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Answer:

The cost basis of an inherited mutual fund is generally the fair market value of the mutual fund on the date of the original owner's death, which means you will not owe taxes on any increase in value that occurred before the original owner's death. However, you will owe taxes on any increase in value that occurs after the original owner's death if you sell the mutual fund later. Keep accurate records of your inherited mutual fund to calculate your cost basis correctly and report any gains or losses when you sell the mutual fund.

User Bdimag
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