1) Does the stepped-up basis belong to the account or the
fund? Can the daughter redirect money in the account to
other funds managed by XYZ Investments, and retain the
stepped-up basis?
2) If the daughter moves money out of the XYZ account and
its bond fund, segregates it in a CD, and reinvests future
interest earnings in the CD, would the stepped-up basis
follow the money and exclude tax on the interest and
increased value of the CD, up to the basis amount? Or is
the stepped-up basis lost when the money is moved.
A family member is inheriting a mutual fund from her father,
who died in January. The father's account is managed by,
let's say, XYZ Investments. The account is invested 100% in
a bond fund [snip].
1) Does the stepped-up basis belong to the account or the
fund? Can the daughter redirect money in the account to
other funds managed by XYZ Investments, and retain the
stepped-up basis?
2) If the daughter moves money out of the XYZ account and
its bond fund, segregates it in a CD, and reinvests future
interest earnings in the CD, would the stepped-up basis
follow the money and exclude tax on the interest and
increased value of the CD, up to the basis amount? Or is
the stepped-up basis lost when the money is moved.
I believe she has a tax loss when she sells the fund. It doesn't
matter what she does with the money.
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