Manage Asset Cost Basis

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EstateExec will estimate the cost basis of assets for you automatically, based on information you provide for Asset Type and Value at Death (or Purchase Amount for assets later purchased by the estate).

You can see an asset's estimated cost basis by highlighting the asset's row in the Assets tab, and clicking the Cost Basis button on the top of the table.

Please note that calculating cost basis can be complex under certain circumstances, so you are advised to seek help from a tax professional if you are dealing with complex or unusual situations. The good news is that cost basis is only needed if you sell an asset, in which case you will need it to be able to report losses or gains on the estate's income tax submissions. It also helpful to pass along these estimates to the heirs, so that when and if they eventually sell the assets, they will have information to help them with their own tax reporting. If you do pass along this information, please remember to repeat the advice about these being your best estimates, and that they should seek help from a tax professional if there is any complexity, or there is any uncertainty about the tax situation.

Cost Basis at Death

An asset has a certain cost basis at the time of death, which never changes (unless you modify the asset's Value at Death). See Cost Basis for a general description of how cost basis at death is determined.

Cost Basis Now

The current cost basis associated with an asset can change under certain circumstances:

  • Cash & Bank Accounts: The cost basis of cash is the value of the cash, so the cost basis of a bank account is always the current account balance.
  • Transfer: If you transfer value from one asset to another, the associated portion of the asset's current cost basis is also automatically transferred.
  • Distribution: If you distribute some or all of an asset to an heir, the associated portion of the asset's current cost basis is automatically allocated to that distribution. You can see the cost basis allocated to a distribution in the Cost Basis column on the Distributions tab.
  • Sale or Discard: If you sell or discard an asset, the asset's value and cost basis automatically drop to nothing, since the asset is no longer in the estate.
  • Purchase: If you purchase an asset for the estate, its value and cost basis at death will be null, since the asset was not part of the estate at death. The initial cost basis "now" will be set to the purchase price.
  • Repayment: When the recipient of an estate loan repays some or all of the principal, the cost basis of the loan asset will be reduced proportionately with the repayment amount.
  • Other Transactions: Other types of transactions may also affect an asset's cost basis. For example, income deposited into an asset (such as a stock dividend reinvestment) will increase the asset's cost basis, as well as qualified expenses paid from the asset (such as stock trading fees). Of course, the impact of any such changes are governed by the overall cost basis treatment of the asset itself (for example, if the transaction occurs within a standard IRA, no change to the IRA's $0 cost basis will occur). These types of issues can get complex, so please keep in mind the cautionary words above.

When the estate is completely settled, no assets should remain in the estate, and thus the value and cost basis "now" of all listed assets should be nothing.

Manual Override

You can manually override EstateExec's cost basis estimates. On the Assets tab:

  1. Select the asset by clicking its row selector checkmark in the leftmost column.
  2. Click the Edit | Asset Cost Basis menu.
  3. Enter the correct amount in the dialog that appears and click the "OK" button.
  4. As always, whenever you want to save your estate changes, click the "Save All" button in the top right corner.

Sometimes you can make so many changes that it gets a little confusing as to what the cost basis should be. If the numbers don't look right, in the Cost Basis dialog you can click the Troubleshoot link and press the Reset button to have EstateExec recalculate the Cost Basis at Death and Cost Basis Now, based upon the asset type, its Value at Death, and any transactions (including distributions) that impact cost basis.

Note that changing an asset's cost basis will not affect previously defined transfers or distributions marked done.

Assistance Required

EstateExec cannot automatically determine cost basis for certain asset types (such as Other), and so for those, when you select the type, you will be presented with a dialog to manually enter the cost basis. You can later change this via the Manual Override steps listed above.

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