Date of Death / Step-Up in Basis
What is a Date of Death A.K.A Step-Up Appraisal?
A date of death appraisal determines the fair market value of a property at the time of an owner's death. This value is essential for tax purposes, especially when considering the step-up in basis. Utilized to determine the step-up in basis for tax purposes, reducing potential capital gains tax on the sale of inherited property. They are essential for heirs, executors, attorneys, and financial planners dealing with inherited property, estate planning, and tax considerations.
Example:
John Smith, a successful entrepreneur, owned a valuable piece of real estate that had appreciated significantly over the years. Upon his passing, the property was to be inherited by his daughter, Emily.
The Challenge:
The property's original purchase price was much lower than its current market value. Emily was considering selling the property but was concerned about the potential capital gains tax on the appreciation.
The Need for a Date of Death Appraisal:
To accurately determine the tax implications, Emily needed to know the property's fair market value at the time of her father's death. This value would serve as the new basis for the property, allowing for a step-up in basis and potentially reducing the capital gains tax if she decided to sell.
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