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Inheriting property, whether expected or unexpected, can raise some questions about what to do with it and what it's worth. Specifically, you'll need to know the property's fair market value (FMV ...
Section 2032 provides an alternate method of determining the property's new basis. If the property is not disposed of within six months of the decedent's death, the executor may elect to use the property's fair market value six months after the date of death but only if such an election results in a decrease in the value of the gross estate. [2]
When you inherit property, the IRS applies what is known as a stepped-up basis to that asset. Here's how capital gains are taxed on inherited property.
But there’s a major caveat for inherited property. When you inherit a property, your cost basis is “stepped-up” to the property’s fair market value at the time you inherit it. Generally ...
Under the stepped-up basis rule, [8] for an individual who inherits a capital asset, the cost basis is "stepped up" to its fair market value of the property at the time of the inheritance. When eventually sold, the capital gain or loss is only the difference in value from this stepped-up basis.
Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When a property is sold, the taxpayer pays/(saves) taxes on a capital gain /(loss) that equals the amount realized on the sale minus the sold property's basis.
The gain is based on the difference between the final sale price and the cost basis of the property, typically the fair market value of the home on the day the decedent died.
Inheritance taxes are paid not by the estate of the deceased, but by the inheritors of the estate. For example, the Kentucky inheritance tax "is a tax on the right to receive property from a decedent's estate; both tax and exemptions are based on the relationship of the beneficiary to the decedent." [52]