A date-of-death appraisal fixes the fair market value of an inherited home on the date of passing, and that value becomes the heir’s cost basis under Internal Revenue Code section 1014. The basis decides the capital gain when the heir sells. The appraisal is the evidence your CPA files with. The page covers how the value is set and assumes you know what a residential appraisal is.
Appraisal Services of Oregon develops independent, USPAP-compliant opinions of market value for residential property across Oregon and Southwest Washington; the full practice is described on the residential home appraisals page.
The stepped-up cost basis is the fair market value of inherited property on the date of passing. A date-of-death appraisal establishes that value with comparable sales and market records from that date. The effective date is the date of passing unless the estate’s CPA elects the alternate valuation date. The appraiser proves the past value from historical evidence and a present-day inspection. The CPA, the estate attorney and the heirs rely on the same value for the tax filing, the estate record and the later sale.
What is the stepped-up cost basis?
The stepped-up cost basis is the fair market value of inherited property on the date of the owner’s death, which replaces the original purchase price as the heir’s basis. Internal Revenue Code section 1014 sets the rule, which most heirs know as the step-up in basis. Capital gain on a later sale is measured from the stepped-up basis, not from what the deceased owner paid.
A house bought decades ago and inherited today carries a basis equal to its value on the date of passing. The gain the heir reports is the sale price minus that basis, minus selling costs. The step-up removes the gain that built up during the owner’s lifetime.
Fair market value for this purpose follows Treasury Regulation 20.2031-1(b): the price a willing buyer pays a willing seller, both informed, neither under compulsion. A date-of-death appraisal from Appraisal Services of Oregon is written to that definition. The next question is how the appraisal fixes the number.
How does a date-of-death appraisal establish the value?
A date-of-death appraisal establishes the value by reading comparable sales, market conditions and the condition of the home as of the date of passing. Sales that closed around that date carry the value. Sales, renovations and market moves after the date are left out.
The report states the effective date in plain terms and shows the evidence behind every conclusion. A retrospective assignment is a recognized assignment type under USPAP, and the report carries the same scope of work, certification and intended users as a current one.
Which date does the appraisal use?
The appraisal uses the date of passing, unless the estate’s CPA or attorney directs the alternate valuation date. Internal Revenue Code section 2032 allows an estate that files a federal estate tax return to elect a value six months after the date of death, when the election lowers both the gross estate and the tax.
Most estates in Oregon and Washington use the date of passing. The alternate date applies only to estates that file Form 706, and the election belongs to the CPA and the attorney. Oregon imposes a separate estate tax on estates above $1 million, filed on Form OR-706, and the same date-of-death value supports that return.
How is a past value proven?
A past value is proven with closed sales from that period, county records, and a present-day inspection connected to the home’s condition on the effective date. Historical photographs, permit history, assessor records and interviews with the family establish what the home looked like on the date of passing. The report states the assumptions that connect today’s inspection to that date.
A home renovated after the death is valued as it stood before the work. Later improvements are separated from the condition on the effective date. The method is the same one behind the retrospective real estate appraisals the practice prepares for divorce and legal matters.
One date-of-death assignment involved an owner preparing to sell a home he had inherited more than thirteen years earlier. Only then did he learn his CPA needed the value as of his mother’s date of death. I reconstructed the market as it stood on that date from historical sales and county records and delivered the appraisal his CPA filed with. A past date limits the evidence, not the assignment.
Who relies on the date-of-death value?
The CPA, the estate attorney and the heirs all rely on the date-of-death value, and each uses it for a different filing. The CPA sets the stepped-up basis and prepares the estate tax return where one is required. The estate attorney places the value on the estate record. The heirs carry the basis forward to the sale.
A personal representative in an Oregon probate proceeding relies on the same value for the estate inventory, which is the subject of the probate appraisals in Oregon prepared under ORS 113.185. One value serves every professional, so no two filings carry different numbers.
Jointly owned homes follow the ownership rule. Oregon gives the step-up to the deceased spouse’s half of jointly held property. Washington, a community property state, gives both halves of community property the step-up under section 1014(b)(6). Your CPA applies the rule; the appraisal supplies the whole-property value both rules start from.
When does an estate need both a date-of-death value and a current value?
An estate needs both values when the heirs keep the property for a time and then sell, divide or distribute it. The date-of-death value sets the basis and supports the tax return. The current value prices the sale or supports a fair division between heirs.
Both values often come from one inspection when you identify both purposes on the first call. The current value runs through the estate appraisals for executors prepared by Appraisal Services of Oregon. The past value runs through the date-of-death appraisals for estate tax described on the service page, which lists what the family should have ready. Preparing both reports together keeps the analysis consistent for every professional.
What does not set the stepped-up basis?
The county assessed value, an online estimate, the sale price years later and the original purchase price do not set the stepped-up basis. The assessed value is a tax figure capped under Oregon Measure 50 and is not fair market value. An online estimate is a model output that never saw the home and carries no signature.
A sale price years after the death reflects a different market. The original purchase price is the number the step-up replaces. A date-of-death appraisal is the evidence a CPA files with, which is the reason the purpose of a home appraisal is settled before the value is developed.
Which date should your estate’s appraisal use?
The stepped-up basis is the fair market value of the inherited home on the date of passing, and Appraisal Services of Oregon fixes that value to the date the estate’s CPA or attorney names. One number serves the tax return, the estate record and the later sale.
Gorge estates with view or acreage property are handled through the Columbia River Gorge residential appraiser page, and the same work covers the Portland Metro, the Willamette Valley, the Oregon Coast and Southwest Washington. Request an appraisal or call 503-757-7100 with the property and the date of passing.
Frequently asked questions
Do I need an appraisal when I inherit a house?
An heir who will sell an inherited house needs a date-of-death value to prove the stepped-up basis, and an appraisal is the documented way to establish it. A basis with no appraisal behind it rests on an estimate the CPA cannot support. The appraisal is ordered before or after the sale.
How do you get a date-of-death appraisal?
A date-of-death appraisal is ordered directly from a certified residential appraiser in three steps. The steps are given below:
- Call or send the property address, the date of passing and the purpose.
- Provide access to the home and any photographs or records from around that date.
- Receive the signed report your CPA and attorney file with.
Is it too late to get a date-of-death appraisal?
A date-of-death appraisal is completed years after a passing when historical market evidence survives for that date. Older dates need more research. The thirteen-year reconstruction above was completed from historical sales and county records.
Does the appraisal tell us the taxes owed?
The appraisal states the fair market value; the CPA calculates the tax. The value feeds the estate tax return and the basis. Tax advice stays with the CPA and the estate attorney.
What should the family have ready?
Have the date of passing, the deed, photographs from around that date and a list of changes made since. Permits and receipts for later work help separate those improvements from the condition on the effective date. Access to the home is still needed for the inspection.
Can the basis be set after the house was sold?
A sold home is valued as of the date of passing from historical evidence and the records of its condition at that time. The later sale price is one data point, read against the market on the effective date. The report states the assumptions used.
