For many inherited assets, federal tax basis is generally the property’s fair market value on the date of death—not the decedent’s original purchase price. Important exceptions and elections exist, so an heir should preserve the valuation record and obtain individualized tax advice before calculating gain, reporting a sale, or assuming a particular tax result.
What “generally” means here
IRS Publication 551 states that inherited property’s basis is generally fair market value at the decedent’s date of death. The publication also identifies exceptions, including a valid alternate-valuation election and certain special-use or conservation-easement situations. It discusses special rules that can matter for community property, jointly held property, trusts, and property transferred back to the decedent within one year.
Those rules are why a general “step-up” phrase is not enough to calculate a tax result for a Texas home. Ownership history, estate filings, community-property facts, improvements, prior rental use, and the actual valuation evidence may all matter.
Keep evidence while it is available
Preserve the death date, an appraisal or other defensible date-of-death valuation record, photos and condition notes, tax records, the deed, improvement records, estate documents, and any later listing or sale documents. Keep the purchase contract, settlement statement, and invoices separate from the valuation record. A real-estate market opinion, an appraisal, and a tax basis calculation have different purposes.
IRS Form 706 instructions explain that an alternate valuation election, when available and properly made, uses specified dates for property that is sold or otherwise disposed of within six months after death and property not disposed of in that period. That is an estate-tax election with conditions, not an automatic choice for every family.
Get advice before a sale is reported
Bring the records to a qualified tax professional and estate attorney before deciding how to report a sale or distribute proceeds. EstatePath can help organize property documents and coordinate an independent appraisal referral, but does not give tax advice, calculate your basis, or guarantee a tax outcome.
Official resources
IRS Publication 551: Basis of AssetsIRS Instructions for Form 706Texas State Law Library: Nonprobate PropertySources inform this educational content; they do not endorse EstatePath. Content reviewed October 5, 2026. Not attorney-reviewed.