Also called: stepped-up basis
When someone dies, the cost basis of assets they held in taxable accounts resets to the value on the date of death, so the gain built up during their life is never taxed.
It applies to taxable holdings such as brokerage accounts and real estate. It does not apply to IRAs, 401(k)s or annuities, which pass to heirs as taxable income. For spouses in community property states, both halves of community property receive the step-up.