Eagle Home Appraisal is an IRS stepped-up basis specialist for residential real property. When inherited real estate is sold, the homeowner, attorney, or accountant may need a competent, credible, and reliable value for a date that came before the sale. In many situations, federal basis rules look to fair market value on the date of the owner's passing. Other rules, elections, ownership facts, or valuation dates may apply.
The appraisal does not calculate tax or decide which rule controls. It documents an opinion of real property value for the effective date identified by the client and tax adviser.
We do not use the standard 1004 lending form for stepped-up basis work. The report is formatted for legal and tax purposes, not mortgage underwriting.
Basis, in general: Basis is a tax-accounting measure used in determining gain, loss, depreciation, and other consequences. The applicable basis for inherited property is a tax question, not an appraisal conclusion.
What people mean by a "step-up"
The phrase step-up basis is commonly used when inherited property receives a basis tied to fair market value as of the owner's passing rather than the owner's earlier cost. The actual adjustment may be upward, downward, partial, or affected by facts outside the appraisal assignment.
For a simple illustration, assume an inherited home later sells for $500,000 and a retrospective appraisal supports a $400,000 value as of the date of passing. The difference is $100,000 rather than treating the full $500,000 sale price as gain. The accountant determines the actual basis, adjustments, gain, and tax.
Do not assume that every inheritance produces the same result. Ask the estate's CPA, enrolled agent, or attorney to confirm:
- Which property interest was inherited.
- Whether the general date-of-passing rule applies.
- Whether an alternate valuation method was elected.
- How community property or separate property treatment affects the analysis.
- Whether prior gifts, trust terms, or other transactions matter.
- Which records should be retained with the return and property file.
The three dates that are often confused
The date of passing
This is a common effective date for an estate-related retrospective appraisal. The appraiser researches the market and property characteristics relevant to that historical date.
The appraisal inspection date
This is when the appraiser observes the property, if an inspection is part of the scope. It may be much later than the effective date. The inspection date does not replace the historical valuation date.
The later sale date
The price received when the property is eventually sold reflects the market, condition, exposure, and transaction circumstances at that later time. It is not automatically the value on the date of passing.
A well-defined assignment keeps these dates separate.
Why a later sale price may not answer the historical question
Between the owner's passing and the sale, any of the following may change:
- Overall Las Vegas market conditions.
- Mortgage rates and buyer purchasing power.
- Inventory and competing listings.
- Property condition, occupancy, or maintenance.
- Renovations, cleanup, repairs, or deferred work.
- Marketing time and transaction terms.
The sale may still be relevant evidence. The appraiser must analyze whether it reflects the property and market as of the retrospective date or whether adjustments and additional evidence are needed.
What a retrospective appraisal should document
The report should clearly identify:
- The property and interest appraised.
- The effective date of value.
- The client and intended users.
- The intended use.
- The property information relied upon.
- The market evidence considered.
- Significant assumptions or limiting conditions.
- The analysis supporting the value opinion.
For inherited real estate, photographs, listings, permits, repair records, insurance documents, and testimony from a knowledgeable contact may help establish historical condition.
Read more about date-of-passing appraisal evidence.
When to order the appraisal
It is usually easier to gather records while the estate administration is active and people still remember the property's condition. If the property may be repaired, emptied, transferred, or sold, preserve photographs and documents before those changes occur.
Before ordering, ask the tax or legal adviser to provide the effective date and intended use in writing. This avoids paying for a current value when a retrospective value was needed, or using a date-of-passing value when another authorized date applies.
How Form 706 can affect the valuation date
IRS Form 706 instructions generally direct estates using the regular valuation method to value property included in the gross estate as of the date of the owner's passing. The instructions also address an alternate valuation election and the conditions attached to it.
That election is not an appraisal choice. The executor and tax adviser decide whether it is available and appropriate. If an alternate date applies, the appraiser needs precise written instructions before beginning.
See Real property appraisals for IRS Forms 706 and 709.
What the appraiser does not decide
The appraiser does not determine:
- Whether an estate or gift tax return is required.
- Whether a basis adjustment is available.
- The amount of taxable gain or loss.
- Whether an alternate valuation election should be made.
- How title, trust language, or community property law affects ownership.
- What a beneficiary should report on a return.
Those questions belong with qualified legal and tax professionals. The appraisal supplies one documented valuation input.
The appraisal process
The five assignment steps below fit the four working phases used by Chip Holmes: consultation, research, market analysis, and delivery.
1. Confirm instructions
Identify the property, ownership interest, effective date, intended use, intended users, report needs, and deadline.
2. Gather historical evidence
Collect records describing the property near the valuation date, including any changes that occurred later.
3. Inspect and research
Inspection scope fits the assignment, and most estate work is seen. The appraiser may complete a full interior inspection, an exterior-only inspection, or in some cases use records and reliable current photos, such as a recent listing. Research comparable sales and market conditions relevant to the historical date.
4. Reconcile the evidence
Analyze the available sales, property differences, market conditions, and historical facts. Explain the reasoning and uncertainty in the report.
5. Preserve the report
Keep the appraisal with the estate, tax, ownership, and later sale records according to the instructions of the estate's advisers.
For service scope, visit Estate and trust appraisals and Probate appraisals.
Frequently asked questions
Do I need an appraisal if the inherited home has already sold?
Possibly. A later sale does not necessarily establish the earlier value. Ask the tax adviser what valuation documentation is needed, then provide the appraiser with the sale contract, closing documents, marketing history, repairs, and other relevant records.
Can the appraiser tell me how much tax I will owe?
No. The appraiser develops the real property value. A tax professional calculates tax consequences using the applicable law and the client's facts.
What if the property went down in value after the owner passed?
That later change does not rewrite the historical market. The assignment should address the specified effective date. The adviser determines how later events affect reporting or a transaction.
Is a broker price opinion enough?
That depends on the intended use and the requirements set by the attorney, tax professional, agency, or court. An appraisal has a defined effective date, intended use, scope, and supporting analysis. Confirm the required level of documentation before ordering.
Can the appraisal use today's condition?
Current observations can help, but the appraiser must account for documented changes after the historical date. Later improvements should not be treated as though they existed earlier.
Reviewed appraisal information
This professional appraisal content is reviewed by George "Chip" Holmes, State Licensed Residential Appraiser, Nevada license #A.0006387-RES. He has been licensed since December 2005 and appears in the ASC registry under 718720. Kristen N. Aste is a Nevada Certified Residential Appraiser, Nevada license #A.0007406-CR. Eagle Home Appraisal focuses on Non-Lending residential work and prepares competent, credible, and reliable appraisal reports in compliance with USPAP.
Request an estate-related valuation
Call (702) 920-4500 or contact Eagle Home Appraisal. Include the property address, effective date supplied by the adviser, intended use, known property changes, access information, and deadline.
If a trustee is retaining a trust appraiser, include the trust-related instructions supplied by counsel or the tax adviser.