David Katz, Matrix Asset Advisors president and chief investment officer What we found First of all, stepped-up basis is a real thing. The Tax Policy Center says it allows someone who inherits real estate to only pay taxes on the property’s increased value from the time it was inherited – not from the time it was originally purchased. “Under current law, capital gains generally are only subject to tax when they are realized upon the sale or exchange of the asset. If the assets are held until death, the gains are not subject to income tax, because the basis is ‘stepped up’ to the fair market value at the time of death,” explained Jessica Jeane, director of public policy & strategic planning at the National Association of Accountants.