SECTION 1014 AND UNDERSTANDING THE TAX NATURE OF CERTAIN ASSETS – Part III A
The Nature of Particular Assets
Understanding how and to what extent assets will benefit from a “step-up” in basis is critical to the estate planning process today. Obviously, certain assets like highly-appreciated assets will benefit more from the “step-up” in basis at death than cash (which has a basis equal to its face value which is equal to its fair market value) or property at a loss (a “step-down” in basis). Moreover, appreciated assets like gold that are considered “collectibles” under the Code, benefit more from a step-up in basis than other appreciated capital assets because the Federal long-term capital gain tax rate for collectibles is 28%, rather than 20%.
If one were to list asset categories or types, starting with those that benefit the most from the “step-up” in basis and ending with those that benefit the least (or actually suffer a “step-down” in basis), it might look as follows:
(1) Creator-owned intellectual property (copyrights, patents, and trademarks), intangible assets, and artwork;
(2) “Negative basis” commercial real property limited partnership interests;
(3) Investor/collector-owned artwork, gold, and other collectibles;
(4) Low basis stock or other capital asset;
(5) Roth IRA assets;
(6) High basis stock;
(8) Stock or other capital asset that is at a loss;
(9) Variable annuities; and
(10) Traditional IRA and qualified plan assets.
A full discussion of every asset type listed above is beyond the scope of these materials, but a number of them deserve additional consideration and discussion and will be featured in the upcoming posts under this topic.
 § 1(h)(4).