How to determine date of death stock value for inheritance basis
Determining Date-of-Death Stock Value
For inherited stock, the recipient’s basis is generally the stock’s fair market value (FMV) on the decedent’s date of death, unless the estate elected the alternate valuation date or another special rule applies.26 U.S.C. § 1014(a), (b)
Publicly traded stock
Obtain the stock’s historical trading data for the date of death:
| Situation | Valuation method |
|---|---|
| Stock traded on the date of death | Use the mean of the highest and lowest quoted selling prices that day. |
| No trading on the date of death, but trading occurred shortly before and after | Use a weighted average of the mean prices on the nearest trading dates before and after death. |
| No usable sales prices | Use the mean of bona fide bid and asked prices, applying the same timing principles. |
These methods are prescribed by 26 C.F.R. § 20.2031-2(b)–(d). The regulation also provides that quoted prices may require modification if they do not reasonably reflect FMV—for example, because of a very large block, controlling interest, or unusually sporadic trading.26 C.F.R. § 20.2031-2(e)
Practical steps
- Confirm the date of death and number and class of shares.
- Determine whether the estate used an alternate valuation date under 26 U.S.C. § 2032.
- Retrieve historical high and low prices for the applicable date from a reliable market-data provider or brokerage.
- Calculate:
(daily high + daily low) ÷ 2 × number of shares - Adjust for stock splits, reverse splits, mergers, spinoffs, or other corporate actions.
- Retain the price source and calculation with the estate records.
- If the stock was privately held, obtain a qualified valuation using company financials, comparable companies, marketability, control, and other relevant factors. The regulation directs consideration of net worth, earning power, dividend capacity, and other relevant factors when market quotations are unavailable.26 C.F.R. § 20.2031-2(f)
For a publicly traded stock, the estate tax return may require the stock to be reported at FMV, while the beneficiary should retain documentation supporting the basis reported on a later sale. The decedent’s broker or the estate’s Form 706 may also provide the reported value.