Tax
§1014 Step-Up Basis
Quick definition
Tax basis adjustment to FMV when property is inherited at death.
Section 1014 provides that the income tax basis of property transferred at death is stepped up (or down) to its fair market value at the date of death. This eliminates capital gains tax on appreciation that occurred during the decedent's lifetime. For founder shares: heir's basis is FMV at date of death, not founder's original $0.0001 basis. Critical estate planning lever. For partnerships, combined with a §754 election + §743(b) adjustment to push the step-up into inside basis. S-corps don't have an equivalent inside-basis step-up — a major estate planning weakness.
Related tax terms
R&D Tax Credit
Federal credit for qualified research expenses, usable against payroll tax by startups.
Delaware Franchise Tax
Annual tax for Delaware corporations, often quoted wildly too high if calculated incorrectly.
Nexus (Sales Tax)
The connection with a state that triggers a tax-collection obligation.
QSBS (Qualified Small Business Stock)
Tax exemption for gains on qualifying startup stock held 5+ years.
Frequently asked questions
- What is §1014 Step-Up Basis?
- Section 1014 provides that the income tax basis of property transferred at death is stepped up (or down) to its fair market value at the date of death. This eliminates capital gains tax on appreciation that occurred during the decedent's lifetime. For founder shares: heir's basis is FMV at date of death, not founder's original $0.0001 basis. Critical estate planning lever. For partnerships, combined with a §754 election + §743(b) adjustment to push the step-up into inside basis. S-corps don't have an equivalent inside-basis step-up — a major estate planning weakness.
- Why is §1014 Step-Up Basis important for startups?
- §1014 Step-Up Basis is a tax concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does §1014 Step-Up Basis belong to?
- §1014 Step-Up Basis is a Tax term in the StartupCFO finance glossary — alongside other tax concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about §1014 Step-Up Basis?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put §1014 Step-Up Basis in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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