IRS Step-Up and Date-of-Death Appraisals, Torrance

It is a written opinion of what the house was worth on the day its owner died, and that value is generally the starting figure for the heirs’ tax basis.

The rule is section 1014(a) of the Internal Revenue Code, which generally resets the basis of inherited property to its fair market value at death. That value can be above or below what the owner paid, so “step-up” names the reset and does not promise a tax benefit. Our report is a retrospective appraisal: it supports the value as of that earlier date.

IRS Publication 551 describes fair market value as the price at which a sale would occur if neither buyer nor seller were compelled to act and each knew the relevant facts. A retrospective appraisal applies that standard to the market of the effective date.

Usually the date of death; your CPA or attorney tells us which date applies, and we state it as the effective date of the report.

The exception is the alternate valuation date under section 2032, which the executor may elect. That date falls six months after death, or earlier for property sold or distributed within the six months. The election is made on the estate tax return, cannot be withdrawn, and qualifies only if it lowers both the gross estate and the tax.

Because today’s value is not what the house was worth then. Comparable sales have to be close in time to the effective date, and for a date several years back the appraiser also looks at how prices were moving at the time.

For example, RPR counts 39 sales inside the Torrance city boundary in September 2026, at a median sold price of $1,050,000, but that blends houses, condominiums, townhouses and apartments in one month, and it describes which properties sold, not how any one house moved in value. The table is on our service area page, and the raw figures are in this CSV file.

Anything that shows what the house was like, and who held it, around the date of death.

• Recorded deeds from the Los Angeles County Registrar-Recorder/County Clerk, which show how title was held.
• Photos and listings from around the date of death, plus any inspection or insurance reports from that time.
• Permits and invoices for later work, with completion dates.
• Contacts and instructions: the date of death, the executor or trustee, and your adviser’s written note on the effective date and the use.

If the house was cleared out, repaired or remodeled after the death, tell us. That work is set aside so the value reflects the house as it was. The City’s 2022 Housing Element identifies 1950 to 1959 as the period when the largest share of Torrance homes were built, and the Land Use Element notes some remodels among the 1950s and 1960s homes of Torrance Gardens, so old finishes and later updates are worth documenting.

A written report your CPA or attorney can keep with the estate file. It states the effective date, the intended use and intended users, the sales chosen from around that date and the adjustments made to them, and the assumptions and limiting conditions. It is prepared to USPAP, the Uniform Standards of Professional Appraisal Practice, by a licensed appraiser. You can look up any California appraiser we assign at the state licence lookup or the national registry.

No appraisal can guarantee how the IRS, a court or any other reader will treat it. The appraisal is an opinion of value, not a tax determination.

Only if the estate has to file one, and the threshold is high. Without a return, the basis rule is unchanged and the appraisal still documents the value for the heirs’ files.

The Instructions for Form 706 say that for U.S. citizens or residents who die in 2026, the executor must file an estate tax return when the gross estate, adjusted taxable gifts and specific exemption add up to more than $15,000,000, or if the executor chooses portability, which transfers the deceased spouse’s unused exclusion to the survivor. On Schedule A the executor explains how real estate values were reached and attaches copies of any appraisals. Without a return, section 1014’s basis rule is unchanged, and a date-of-death appraisal still documents the value for the heirs’ files.

California is on the IRS list of community property states in Publication 551. Under section 1014(b)(6), the survivor’s one-half share of community property counts as property received from the spouse who died, so the whole property can take a new basis at date-of-death value, on the condition that at least half of the whole community interest is includible in the decedent’s gross estate. Publication 551 notes the rule applies whether or not the estate has to file a return.

So a date-of-death value can matter even when the surviving spouse stays in the house. Whether it was community property turns on its history, such as the money used to buy it and how title was taken; your tax adviser and attorney make that call.

Not for a recent death in California. Proposition 6, approved by voters in 1982, repealed the state’s inheritance and gift tax, and the State Controller’s Office now collects inheritance tax only where the decedent died before June 8, 1982. The Controller’s estate tax page adds that California stopped requiring its own estate tax return for deaths from January 1, 2005 onward.

Federally, there is no inheritance tax on heirs either. The tax that exists is the estate tax, which 26 U.S.C. sections 2001 and 2002 place on the transfer of the taxable estate, with the executor paying it. For U.S. citizens or residents who die in 2026 it touches only estates over the $15,000,000 basic exclusion amount. Publication 525 generally leaves an inheritance out of the recipient’s income, and when an heir later sells, the IRS taxes only the gain over their basis, which generally means the date-of-death value a retrospective appraisal supports.