Stepped-up basis in Florida: which inherited assets get it and how to document the value
Under 26 U.S.C. § 1014 an heir's basis in inherited property is its fair market value at the date of death. This guide covers which assets get that basis, which do not, how each asset is valued, and what the estate must report, with the IRS source for each rule.
The basis of property acquired from a decedent is its fair market value at the date of death. If the estate elects the alternate valuation date, it is the value on that date (26 U.S.C. § 1014(a)(1)-(2)). Basis is the figure subtracted from the sale price to find gain. A higher basis means less taxable gain, and the increase in value that occurred during the decedent's life is not taxed to the heir.
Florida adds no state tax to the sale. Florida does not impose a personal income tax or an inheritance tax (Florida Department of Revenue, Tax Information for New Residents, accessed October 17, 2026), and the federal change that eliminated Florida's estate tax applies to deaths after December 31, 2004 (Florida Department of Revenue, Estate Tax, accessed October 17, 2026). Capital gains tax on a sale of inherited property is federal.
Not every inherited asset gets the new basis. Table 1 lists the rules by asset. The Sources section lists each authority, last checked October 17, 2026.
Which inherited assets get a new basis
Section 1014(b) lists the property treated as acquired from a decedent. Section 1014(c) removes property that is a right to receive income in respect of a decedent.
| Asset | Basis for the heir | Source |
|---|---|---|
| Real estate left by will or intestacy | Fair market value at the date of death | 26 U.S.C. § 1014(a)(1), (b)(1); Pub. 551 |
| Stocks, bonds and mutual funds in a taxable account | Fair market value at the date of death | 26 U.S.C. § 1014(a)(1); Pub. 551 |
| Household goods, jewelry, collectibles, vehicles | Fair market value at the date of death | 26 U.S.C. § 1014(b)(1) |
| Cryptocurrency and other digital assets | Digital assets are property for U.S. tax purposes, so the same rule applies: fair market value at the date of death | IRS, Digital assets; 26 U.S.C. § 1014 |
| Assets in a revocable trust | Fair market value at the date of death. Property the decedent transferred to a trust and kept the right to revoke, or to change the enjoyment of, is treated as acquired from the decedent. | 26 U.S.C. § 1014(b)(2), (b)(3), (b)(9) |
| Assets in an irrevocable trust that are not in the decedent's gross estate | No adjustment. The basis does not change at the grantor's death. | Rev. Rul. 2023-2 |
| Spouses' home held as tenants by the entirety, or as joint tenants with right of survivorship if the spouses are the only joint tenants | One-half is included in the decedent's estate whatever each spouse paid. The survivor's basis is the cost of the survivor's half plus the date-of-death value of the half inherited. | 26 U.S.C. § 2040(b); Pub. 551, Qualified Joint Interest |
| Property held in joint names by non-spouses | The part included in the decedent's gross estate, based on contribution, gets the adjustment. The survivor keeps cost basis in the part the survivor paid for. | Pub. 551, Property Held by Surviving Tenant |
| Traditional IRA, 401(k) and other retirement balances | No adjustment. The balance is income in respect of a decedent, taxed to the recipient when distributed. | 26 U.S.C. § 1014(c); § 691; Pub. 559 |
| Roth IRA | Qualified distributions are not taxed. Earnings through the date of death in a non-qualified distribution are income in respect of a decedent. | Pub. 559, Roth IRAs |
| Annuities described in 26 U.S.C. § 72 | Excluded from the § 1014(b)(9) adjustment | 26 U.S.C. § 1014(b)(9)(A) |
| Series EE and I savings bonds | No adjustment for accrued interest. Interest earned to death is reported on the final return if the personal representative elects, or otherwise by the recipient. | Pub. 559, U.S. savings bonds acquired from decedent |
| Appreciated property the heir or the heir's spouse gave the decedent within one year before death | The decedent's adjusted basis, not fair market value | 26 U.S.C. § 1014(e); Pub. 551 |
Sources: the authority in the last column. Distributions from retirement accounts are covered in the inherited IRA guide. Florida is not a community property state. Property that was community property under another state's law is addressed in the Florida Uniform Disposition of Community Property Rights at Death Act, §§ 732.216-732.228, and in 26 U.S.C. § 1014(b)(6).
Worked example
The figures in Table 2 are an illustration. A decedent bought 1,000 shares in 1980 for $6 a share. At death the shares trade at $210 a share.
| Event | Basis | Sale price | Taxable gain |
|---|---|---|---|
| Decedent sells the day before death | $6,000 (cost) | $210,000 | $204,000, taxed to the decedent |
| Heir sells one week after death at the date-of-death price | $210,000 | $210,000 | $0 |
| Heir sells in 2028 at $240 a share | $210,000 | $240,000 | $30,000, long term |
The gain after death is long term whatever the heir's holding period, because inherited property is treated as held for more than one year (26 U.S.C. § 1223(9); Pub. 544). Rates are in the selling an inherited home guide.
The adjustment works in both directions. Section 1014(a) sets the basis at fair market value, so property worth less at death than the decedent paid takes a lower basis, and the decedent's unrealized loss is not available to the heir.
How each asset is valued at death
The Treasury Regulations under the estate tax set the valuation standard the basis rule borrows. Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither under compulsion and both with reasonable knowledge of the relevant facts (26 C.F.R. § 20.2031-1(b)).
| Asset | Value | Source |
|---|---|---|
| Real estate | Fair market value. An appraisal as of the date of death records it. If Form 706 is filed or required, the estate tax value is the basis. | 26 C.F.R. § 20.2031-1; Pub. 551 |
| Listed stocks and bonds | The mean between the highest and lowest quoted selling prices on the valuation date. If there were no sales that day but there were sales within a reasonable period before and after, the regulation uses a weighted average of the means on the nearest dates. | 26 C.F.R. § 20.2031-2(b) |
| Mutual fund shares | The public redemption price in effect at death | 26 C.F.R. § 20.2031-8(b) |
| Interest in a business | The net amount a willing purchaser would pay a willing seller, taking the business's assets, earnings and other listed factors into account | 26 C.F.R. § 20.2031-3 |
| Household and personal effects | Fair market value. If valuable articles such as jewelry, paintings, antiques or collections total more than $3,000, the regulation calls for a sworn appraisal filed with the estate tax return. | 26 C.F.R. § 20.2031-6 |
| Digital assets | No Treasury regulation prescribes a price source for inherited digital assets. The general fair market value standard applies. Record the exchange, price and time used. | 26 C.F.R. § 20.2031-1; IRS, Digital assets |
If no Schedule A (Form 8971) was received, Pub. 551 says basis can be determined using the appraised value at the date of death for state inheritance or transmission tax purposes. Florida has no estate or inheritance tax, so no state value exists. The valuation must be obtained and kept. Pub. 551 requires accurate records of every item that affects basis.
Alternate valuation date
The personal representative may elect to value the gross estate six months after death, or on the date of distribution or sale if earlier (26 U.S.C. § 2032(a)). The election is available only if it decreases both the gross estate and the estate and generation-skipping transfer tax due (§ 2032(c)). With a 2026 basic exclusion amount of $15,000,000 (IRS, Estate tax, accessed October 17, 2026), an estate that owes no federal estate tax cannot decrease it, so the election is unavailable to it. When the election is made, § 1014(a)(2) uses that value as the basis.
What the estate must report to heirs
Form 706 is required when the gross estate plus adjusted taxable gifts exceeds the basic exclusion amount for the year of death ($15,000,000 for 2026, IRS, Estate tax). When Form 706 is required, the executor files Form 8971 and gives each beneficiary a Schedule A that reports the estate tax value of the property. Form 8971 is not required when the estate is below the basic exclusion amount, or when the return is filed solely to elect portability, solely to allocate generation-skipping transfer tax exemption, or solely as a protective filing (Instructions for Form 8971 (08/2025), accessed October 17, 2026).
Section 1014(f) caps the heir's basis at the final estate tax value for property whose inclusion increased the estate tax. Pub. 544 points to the penalties that may apply for inconsistent basis reporting. For estates that file no return, the heir uses the date-of-death fair market value.
Trusts
A revocable trust becomes irrevocable at the grantor's death. Property the grantor transferred to a trust while keeping the right to revoke it, or to change its enjoyment, is treated as acquired from the decedent, so the trust assets receive the adjustment (26 U.S.C. § 1014(b)(2), (b)(3)).
An irrevocable trust is different. In Rev. Rul. 2023-2 the IRS held that assets of an irrevocable grantor trust that are not includible in the owner's gross estate do not receive a § 1014 adjustment at the owner's death (Rev. Rul. 2023-2). The trade-off between a trust built for asset protection and the adjustment is a planning question.
A beneficiary who receives property distributed from a non-grantor trust generally takes the trust's adjusted basis in it, as further adjusted for gain or loss the trust recognizes (Pub. 551, Property Received from a Trust). The trust administration guide covers the process.
Selling now or holding
The tax result depends on the sale price compared with the date-of-death value, not on how long the heir held the asset.
- Sale at or near the date-of-death value. Little or no gain, because basis equals value (Table 2).
- Sale after appreciation. The increase after death is long-term gain (26 U.S.C. § 1223(9)).
- Heir moves into an inherited home. The heir may qualify for the home-sale exclusion of up to $250,000 ($500,000 on a joint return where both spouses meet the use test) after owning and using the home as a main home for 24 months of the 5 years before the sale (26 U.S.C. § 121; Pub. 523).
- Surviving spouse. A surviving spouse who has not remarried and sells within 2 years after the date of death may take the $500,000 exclusion if the other conditions in Pub. 523 are met.
Records to keep
- The date-of-death valuation for each asset: appraisal, brokerage statement or exchange record (Pub. 551).
- Any Schedule A (Form 8971) and Form 706 value (Instructions for Form 8971).
- Records of improvements and selling costs. For a home, keep them until 3 years after the due date of the return for the year of sale (Pub. 523).
- The letters of administration or trust certification showing who held the asset.
Sources
Last checked: October 17, 2026.
- 26 U.S.C. § 1014, § 1223, § 121, § 2032, § 2040 and § 691. Basis of property acquired from a decedent; holding period; home-sale exclusion; alternate valuation; joint interests; income in respect of a decedent.
- 26 C.F.R. § 20.2031-1, § 20.2031-2, § 20.2031-3, § 20.2031-6 and § 20.2031-8. Valuation of property.
- IRS Publication 551 (12/2025), Basis of Assets; Publication 559 (2025), Survivors, Executors, and Administrators; Publication 544 (2025); Publication 523 (2025). Accessed October 17, 2026.
- Rev. Rul. 2023-2, Internal Revenue Service. Basis of irrevocable grantor trust assets not in the gross estate.
- Instructions for Form 8971 and Schedule A (08/2025); About Form 8971. Accessed October 17, 2026.
- IRS, Estate tax, basic exclusion amount table; IRS, Digital assets. Accessed October 17, 2026.
- Florida Department of Revenue, Tax Information for New Residents (GT-800025, R. 08/25); Florida Department of Revenue, Estate Tax. Accessed October 17, 2026.
- §§ 732.216-732.228, Fla. Stat. (2026). Florida Uniform Disposition of Community Property Rights at Death Act.
- Ch. 2026-57, Laws of Fla. changed Florida probate thresholds, effective July 1, 2026. It did not change the federal basis rules on this page.
What people ask us about this.
Does Florida have a state capital gains tax on inherited property?
What if the property was worth less at death than the decedent paid?
Do inherited IRAs and 401(k)s get a stepped-up basis?
Do I get a step-up on inherited cryptocurrency?
How much of a home owned by spouses gets a new basis when one spouse dies?
Do assets in an irrevocable trust get a step-up?
Can the IRS challenge the date-of-death value?
Is the inherited property taxed as long-term gain if I sell it right away?
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