Step-Up Basis Appraisals

A Step-Up Basis Appraisal is a specialized valuation that establishes the fair market value of inherited real estate as of the previous owner's date of death. This crucial appraisal can significantly reduce capital gains taxes when heirs eventually sell the property.

Key Aspects of Step-Up Basis Appraisals

• Tax Advantage: The primary benefit of a Step-Up Basis is that it resets the property's cost basis to its fair market value at the date of death, potentially eliminating years or decades of appreciation from capital gains tax calculations.
• Timing Importance: The appraisal must accurately reflect the property's value specifically on the date of death, requiring an appraiser experienced in retrospective valuations who can analyze historical market conditions.
• Documentation Requirements: The appraisal report must be thorough and defensible, containing comparable sales data, detailed property analysis, and clear methodology that will withstand scrutiny from tax authorities.
• Professional Expertise: These appraisals require specialized knowledge of both real estate valuation principles and estate tax regulations to ensure compliance with IRS requirements and maximize tax benefits.
• Attorney Collaboration: We work closely with estate attorneys to provide the precise documentation needed for probate proceedings, tax filings, and proper estate settlement.

It's important to note that a Step-Up Basis Appraisal is essentially the same as a Date of Death Appraisal - both determine the property's fair market value as of the date of death. The difference is primarily in how the valuation is used: Date of Death Appraisals focus on estate settlement purposes, while Step-Up Basis emphasizes the tax benefits for heirs.

For beneficiaries inheriting property, this appraisal represents a significant financial opportunity. For example, if a parent purchased a home for $150,000 that's worth $600,000 at their passing, without a Step-Up Basis Appraisal, the heir might face capital gains tax on $450,000 of appreciation. With a properly documented Step-Up, the new basis becomes $600,000, potentially saving tens of thousands in taxes when the property is sold.