What is a step-up in basis and how does it affect capital gains taxes for heirs?

What is a step-up in basis and how does it affect capital gains taxes for heirs?

• A. A step-up in basis resets the cost basis to fair market value at the decedent's death, reducing capital gains for heirs.
• B. A step-up in basis increases the tax on heirs when they sell inherited assets.
• C. Step-up applies only to assets held in a retirement account.
• D. Step-up means the heirs receive a higher tax rate on capital gains.

Answer: (A)