Inherited Home determining Basis?

11 Replies

I inherited a home from my dad in Austin , Tx . And would like to rent it or live in it while i fix it up.I am trying to figure out the best way to go about figuring the cost basis . I would assume that I would want the highest value so when i sell it the gains would be lower on paper. I have the choice of Locking the basis at the time of death or on the date 6 months after(do not know the specifics how you do this). I am not sure how to go about this ,perhaps getting an estimate from equal homes sold during that time period . Any thoughts on this . Thank you in advance.

I know stocks step their basis up to value at date of death for capital gains purposes.  I would imagine fair market value would be appropriate.

From what I understand it is an appraisal situation that would help you avoid any legal difficulties.  The IRS doesn't want you artificially inflating cost basis a 3rd party appraiser even though it will cost money is probably a good way to go.

Originally posted by @Glenn N. :

I inherited a home from my dad in Austin , Tx . And would like to rent it or live in it while i fix it up.I am trying to figure out the best way to go about figuring the cost basis . I would assume that I would want the highest value so when i sell it the gains would be lower on paper. I have the choice of Locking the basis at the time of death or on the date 6 months after(do not know the specifics how you do this). I am not sure how to go about this ,perhaps getting an estimate from equal homes sold during that time period . Any thoughts on this . Thank you in advance.

 If you have the option to lock the basis 6 months after (It is called alternate valuation election, if you chose it,  then the basis will be determined as of the date six months after the date of death),  and you think the market is going up in your area, then chose that option. The easiest way to do this would be hiring an appraisal.  $200- 350.. Use that as your inherited basis plus if you make any improvements.  

To document cost basis in the past I have used the assessed value on some occasions and appraisals on others, IRS had no issues either way.

If you don't already have a CPA, you may want to consider hiring one.

yep already have one.

You want an appraisal.  Tax assessments may or may not have a relationship with market value.  Its money well spent to lock in your new basis.

Thank you all ,yes I suspected that would have to get a real appraisal of some type , I’ll do it . Thank you for the responses.

Originally posted by @Glenn N. :

I inherited a home from my dad in Austin , Tx . And would like to rent it or live in it while i fix it up.I am trying to figure out the best way to go about figuring the cost basis . I would assume that I would want the highest value so when i sell it the gains would be lower on paper. I have the choice of Locking the basis at the time of death or on the date 6 months after(do not know the specifics how you do this). I am not sure how to go about this ,perhaps getting an estimate from equal homes sold during that time period . Any thoughts on this . Thank you in advance.

 Keep in mind if you use the Alternative Valuation Date you have to revalue all assets in the estate as of that date, not just the house. Also, if assets are distributed before the alternative valuation date you can only use the date of the distribution.

Assuming an estate tax return was not filed for your dad, then you would need to order an appraisal as of date of death. You get to restart depreciation as well if you rent out the property.

Great info thank you. More involved than I though, devils in the details.

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