Cost basis and inherited property

For many inherited assets, basis is generally fair market value at the date of death, or an applicable alternate valuation value. An adjustment may increase or decrease basis. Preserve appraisals and estate valuation statements rather than using today's price or the amount you received as a substitute.

Traditional IRAs and other income in respect of a decedent do not receive the usual inherited-property basis step-up. Untaxed retirement income can remain taxable when distributed. Certain property given to the decedent within one year and returned to the donor or donor's spouse, special valuation rules, and other exceptions require separate analysis.

A basis adjustment does not exempt later appreciation from tax. Selling costs, improvements, depreciation, joint ownership, community property, and prior gifts may matter. Ask the CPA to reconcile basis before a sale and the attorney to confirm the interest you actually inherited.