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Monday, May 11, 2015

Cost Basis of Inherited Property in the United States

Should you inherit property in the United States, you should know the cost basis to figure your capital gains if you should choose to sell the property once it is received. 

Cost Basis is Fair Market Value on the Date of Death

If a property is inherited in the United States, the cost basis for tax purposes will be the fair market value of the property on the date of death. If the executor elects an alternate valuation date, the cost basis of the property is 6 months after the date of death.

This rule also applies to those who receive property prior to death without full and adequate consideration if the life estate is retained/subject to the right of revocation. The fair market value as a basis rule also applies, if you receive inherited property from a spouse on property that is jointly owned as community property or right to survivorship.