INHERITED PROPERTY
Basis of inherited property:
The basis of property inherited from a decedent is the property's Fair Market Value on the date of the decendent's death (called the primary valuation date).
The basis of property inherited from a decedent is the property's Fair Market Value 6-months after the date of death if the executor or administraitor of the estate elects the alternate valuation date for estate tax purposes (called the alternate valuation date).
Thus, the recipient's basis for the inherited property is stepped-up (or stepped-down) from the decedent's cost or adjusted basis to the property's Fair Market Value at the decedent's date of death or alternate valuation date.
The recipient will need to know their basis to determine any subsequent gain or loss when they sell or dispose of the property.
NOTE: Once property is inherited, the recipient will need to make any required plus or minus adjustments as necessary to their initial inherited basis to calculate their adjusted basis on the date they sell or dispose of the property. Then, they will be able to calculate the gain or loss upon the sale or disposition.
Holding Period of inherited property:
Inherited property is always deemed or considered to be long-term property, regardless of whether the property is sold or disposed of at a gain or loss.
Thus, the recipient's holding period for inherited property is always deemed to be long-term.
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