12d • Did You Know?
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⚠️ 1. Capital Gains Tax Burden Increases
Without a documented date‑of‑death value, the IRS assumes the heir’s basis equals the decedent’s original purchase price — not the property’s current market value.Result: the sale appears to have a much larger profit.
Example:
Item
With Step‑Up Basis
Without Step‑Up Basis
Original Basis (what decedent paid)
$150,000
$150,000
Date‑of‑Death Value
$400,000
— (no record)
Sale Price (24 months later)
$410,000
$410,000
Taxable Gain
$10,000
$260,000
That $260 K would likely be subject to long‑term capital gains tax (typically 15–20% federal + state), creating up to $50 K – $75 K in avoidable taxes.
🧾 2. No IRS‑Recognized “Fair Market Value at Death” Proof
If audited or questioned, heirs cannot substantiate the stepped‑up value without an appraisal dated near the decedent’s death. CPA documentation becomes speculative, and the IRS may reject estimated comparables.
⏳ 3. Lost Estate‑Planning Protection
Even if the property is sold within 24 months, the IRS allows the estate or heir to use date‑of‑death value only if it’s properly determined and supported by credible evidence (IRS Publication 551, Basis of Assets; Topic 701).
Without an appraisal, you miss that protection window — and retroactive appraisals done too late can be challenged. Plus, tetrospective appraisals are often after the property has been sold and the appraiser does not have access to the property.
đź“–Â Source
- IRS Publication 551 (2023) – Basis of Assets, Section “Property Received as a Bequest, Inheritance, or Gift.”https://www.irs.gov/publications/p551
- IRS Topic 701 – Sale of Your Home (for capital‑gain exclusion context).
In short:Failing to get a step‑up basis appraisal after someone passes can turn a near‑zero tax event into a five‑figure tax liability.A single certified valuation preserves the family’s equity and ensures compliance before selling the home. I am not an attorney or CPA.
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