Inherited property and stepped up basis vs 1031 exchange

[Account Closed]

I have a client in California who wants to sell their house to me and keeps mentioning a 1031 exchange, however, she inherited the property in April 2011.  

This house is in bad condition and I'm buying it as a flip, how do I determine her stepped-up basis at the time of inheritance? Will my client use the property's ARV at the time of inheritance as the stepped up basis? If so they may not be subject to capital gains taxes and there will be no need for a 1031 exchange, atleast this is my hope.

[Brandon Hall]

Honestly, you don't want to be involved in that process or offer any advice. I know you want to help for deal making purposes, but it's really not your issue. All the reporting will be done on their side.

The reason I mention this is due to liability (especially in CA!). 

Imagine she gets audited and it's determine basis was incorrectly calculated and she owes money. I imagine she'd be able to easily litigate against you and would likely win. Her argument would be: "a developer enticed me into selling and assured me that these would be my taxes owed. He's a schemer as he has no tax experience so I feel defrauded." 

I'm not an attorney, but as a CPA I know what verbiage to use to express limited assurance and mitigate liability in regards to tax matters. I know the questions to ask in order to collect necessary info.

I'm sure you could do it. I even have a calculator I can share with you to help out. I'm just saying if I were a non-professional/expert, I wouldn't render advice. Too risky.