As nice as it sounds to receive an inheritance, inheriting stocks can cause some confusion -- for instance, you may run into tax issues you hadn't anticipated. It's hard enough to deal with taxes on your own assets, let alone ones where you have no idea how much was paid for the shares or even whether you have a gain or loss.

First off, understand that there's a big difference between a gift and an inheritance (received from someone's estate). With a gift of appreciated stock or property, you take your cost for tax purposes, also known as your tax basis, from the person who gave you the property. Tracking down this figure can sometimes be difficult. With inherited property, on the other hand, you generally get a new tax basis equal to the fair market value of the stock on the date of death of the donor. Because this usually causes the tax basis to increase, this is also known as a stepped-up basis.

If an estate-tax return was filed, then it should disclose the value of the stock at date of death. Alternatively, if you know the date, you can get the stock price online at various sources -- or even by calling your broker or the company's investor relations department and asking. Once you determine the value, back up your findings with a letter from the broker or the shareholder-relations department. You'll need that information just in case the IRS wants to double-check (read: audit) your tax return.

The stepped-up basis often greatly reduces capital gains taxes if you decide to sell your inherited stock. In addition to getting a new basis, you also get to treat any gain as long-term, even if the person who left you the shares owned them for only a short time before death. This can be helpful not only if you want to sell the stock but also if you decide to give it to charity.

For more helpful tax hints, you can find informative articles in our Tax Center.

It's important to remember that before you need to worry about taxes, you first have to make money with your investments. To receive promising stock ideas delivered via email each month, take a look at our suite of investment newsletters, all of which are available on a free trial basis with no obligation.