Date-of-death value is what an inherited house was worth on the day its owner died. Under federal law, that value generally becomes the heir's starting point, called basis, for measuring gain or loss when the house is sold. That makes it central to any income tax on a sale. In California, the death is also a change in ownership that can lead to a new property-tax assessment.
California property guideUpdated October 17, 2026General information, not legal or tax advice
Most people facing this question have just inherited a house in California, alone or with brothers and sisters, and are trying to decide whether to sell. Someone has mentioned a "stepped-up basis" or Proposition 19. Now they need to know what the house was worth when their parent or spouse died, and why that number matters. The figure is set once and then follows the property through tax returns, the county assessor's records and any sale. Below is what the value is, how it is set and documented, and how it connects to a sale.
What Date-of-Death Value Means for Inherited Property
Date-of-death value is the fair market value of the property on the day the owner died. In plain terms, it is the price the house would likely have brought that day in an ordinary sale between a buyer and a seller who both knew the relevant facts and neither of whom had to act.
That one figure does two separate jobs.
It sets the heir's income-tax basis. Basis is the starting value used to work out gain or loss when the property is later sold. For inherited property, federal law ties basis to the value at death under 26 U.S.C. § 1014(a).
It connects to California property tax. A transfer at death is a change in ownership. That can lead the county assessor to set a new assessed value, which is the value the county taxes.
These are two different legal systems. Federal income tax is governed by the United States Code and handled by the IRS. California property tax is governed by the Revenue and Taxation Code and handled by the assessor in the county where the house sits. The same date anchors both, but each system asks its own questions. A good answer under one does not settle the other.
How the Stepped-Up Basis Rule Works Under Federal Law
The federal rule is short. Under 26 U.S.C. § 1014(a), except as that section otherwise provides, the basis of property acquired from a decedent is "the fair market value of the property at the date of the decedent's death." The statute gives three alternatives:
a value at an alternate valuation date the estate elects;
a special-use value for certain property; and
the decedent's own basis, to the extent a conservation-easement exclusion applies.
"Stepped-up basis" is the everyday name for the main rule. Suppose, as a hypothetical, a parent bought a house decades ago for far less than it was worth when they died. The heir's basis is generally the higher value at death, not the old purchase price. Gain on a later sale is then measured from that value. The rule also works the other way. If the house was worth less at death than the decedent paid, the basis steps down to the lower value at death.
Surviving spouses have an added point. The IRS's Publication 551, Basis of Assets says that when a spouse dies in a community property state such as California, the total value of the community property generally becomes the basis of the entire property, including the survivor's half. This applies if at least half of the community interest is includible in the decedent's gross estate.
The alternate valuation date belongs to the estate, not to an individual heir. Under 26 U.S.C. § 2032, the executor may elect it on the federal estate tax return. The election is allowed only if it decreases both the value of the gross estate and the estate's tax, and once made it cannot be revoked. Whether any estate or sale owes tax depends on its own facts. A CPA, an enrolled agent or a tax attorney reviews basis and income-tax questions.
Determining Fair Market Value: The Date-of-Death Appraisal
An appraisal is the usual way the value at death is documented. Families often call it a date-of-death or retrospective appraisal. It is prepared after the death but values the property as of the date of death, using sales of similar homes and market information from that time. The work is typically done by a real estate appraiser licensed in California. The California Bureau of Real Estate Appraisers' About BREA page describes the state's licensing and enforcement program for those appraisers.
The person with authority over the property usually arranges the valuation. That is the successor trustee for a trust, or the personal representative in probate. The personal representative is the person a judge appoints to represent the estate; an executor or administrator holds that role.
Probate adds its own steps:
Filing an inventory and appraisal. Under Probate Code section 8800, the personal representative files an inventory and appraisal with the court clerk within four months after letters are first issued to a general personal representative. The court may allow further time that is reasonable for the case.
Valuing each item at death. Probate Code section 8802 requires the inventory to state each item's fair market value at the time of the decedent's death.
Appraisal by a probate referee. Except as a statute otherwise provides, Probate Code section 8902 has a probate referee appraise the property the personal representative does not. Real estate is in that group. The California State Controller's Probate Referees page explains that the Controller appoints these referees.
The same documented value supports the basis an heir later reports to the IRS. Property-tax valuation is the county assessor's question.
California Property Tax Reassessment and Proposition 19
A death can raise a family's property-tax bill. Under Rev. & Tax. Code section 60, a "change in ownership" means a transfer of a present interest in real property whose value is substantially equal to the value of the fee interest. When inherited property changes ownership in that way, the county assessor generally reassesses it to current market value.
Someone has to tell the assessor about the transfer. Rev. & Tax. Code section 480 has the personal representative of a probated estate file a change in ownership statement with the county recorder or assessor before or when the inventory and appraisal is filed. In other transfers at death, including through a trust, the trustee or the transferee files it within 150 days after the date of death.
For a transfer on or after February 16, 2021, the parent-child and grandparent-grandchild exclusion is Rev. & Tax. Code section 63.2, which carries out Proposition 19. It excludes a transfer of the parent's principal residence from reassessment, in whole or in part. The grandparent-grandchild version applies only if all of the grandchild's parents who are the grandparents' children have died. The conditions include:
Living in the home. The home must become the child's principal residence within one year of the transfer.
Filing for an exemption. The child must file for the homeowners' or disabled veterans' exemption within a year.
Staying within a value limit. Value above the existing taxable value plus a dollar limit is added to the assessment. That limit is adjusted over time, and the county assessor's office publishes the current figure.
The exclusion is not automatic, because a claim must be filed with the assessor. The claim is due within three years after the transfer, or before the property is transferred to a third party or the eligible child stops living there, whichever is earlier. A claim is also timely within six months after the mailing of a supplemental or escape assessment notice. A later claim on a property not yet sold to a third party may be granted going forward from the year it is filed.
Value at the time of transfer is what the assessor compares against that limit. Reassessment affects the yearly tax bill, not the gain measured on a sale. The county assessor's office answers reassessment and exclusion questions.
When the Property Passes Through a Trust, Probate, or a Transfer on Death Deed
How the house passed changes who signs the papers and which office is involved. It does not change the date that anchors basis.
There are three common routes:
Probate. This is the court-supervised process for transferring a decedent's estate. A judge appoints a personal representative, who, as the California Courts' Guide to property after someone dies puts it, collects the property, pays the bills and distributes what remains to heirs or beneficiaries. A sale during probate follows its own court steps.
A revocable living trust. This is an arrangement in which a trustee holds property for beneficiaries, with property in the trust passing outside probate. After the death, the successor trustee holds that authority.
A transfer on death deed. This is California's deed that passes real property to a named person at death.
Federal law treats each route alike for basis. Under 26 U.S.C. § 1014(b), property considered acquired from a decedent includes property received by bequest, devise or inheritance. It also includes property the decedent placed in a trust while reserving the right to revoke it. Either way, the value at death is the anchor.
The route can also affect whether a simplified procedure is available. Examples are the petition to determine succession to the decedent's primary residence, the affidavit for real property of small value, and the spousal or domestic partner property petition. Each has its own court or office. Where an heir lives in another state, that state's law may apply to them.
How Date-of-Death Value Affects a Sale of Inherited California Real Estate
Gain on a sale is generally the sale price minus the stepped-up basis set at death, less the costs of selling. If a house sells soon after the death for close to its value then, the gain may be small, and there may be none. The IRS answer to "Is money received from the sale of inherited property considered taxable income?" says that selling for more than basis produces a taxable gain.
Timing matters less than many families expect. Under 26 U.S.C. § 1223(9), a person whose basis comes from section 1014 and who sells within one year after the death is treated as having held the property for more than one year. The IRS's Publication 559, Survivors, Executors, and Administrators puts it this way: gain or loss on inherited capital assets is long term regardless of how long the heir held them. The tax calculation itself belongs with a CPA, an enrolled agent or a tax attorney.
The appraisal from the date of death is a key record for any sale, because it supports the basis the seller reports.
A family can sell in three ways:
A listing with a licensed real estate agent. This exposes the house to the open market, usually after preparation and showings, with commissions owed.
A sale by the owner without an agent. The family handles pricing, marketing and paperwork itself.
A direct sale to a buyer who pays cash and takes the house as it is. A cash offer versus listing comparison often shows the direct offer coming in under open-market price. The buyer is taking on the repairs, the risk and the cost of reselling. In return, the seller usually faces less preparation, fewer showings and less dependence on a buyer's loan. For a house that needs repairs, it can be sold in its present condition.
No path changes the estate's authority, the court's steps, required notices or taxes. Comparing written offers and estimated net proceeds is how a family tells which way fits. Net proceeds are the price less commissions, repairs, carrying costs, loan payoffs and closing costs.
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Frequently Asked Questions
How do you determine the date-of-death value of inherited property?
A licensed appraiser typically prepares a retrospective appraisal valued as of the date of death, based on comparable sales from that time. The successor trustee or personal representative usually arranges it. In probate, a probate referee appraises the real estate. A CPA, enrolled agent or tax attorney reviews IRS questions, and the county assessor handles property-tax value.
What is the date-of-death valuation rule?
Under 26 U.S.C. § 1014(a), the basis of property acquired from a decedent is generally its fair market value at the date of death. The heir's starting point for measuring gain or loss is that value, not what the decedent originally paid, subject to the alternatives described above.
What is considered the date of inheritance?
For federal basis, the date that matters is the date of the decedent's death. For California property tax, a transfer at death is also measured from the death, which is why the change in ownership statement deadline in Rev. & Tax. Code section 480 runs from it. Whether the property passed through probate, a trust or a transfer on death deed does not move that date.
How is inherited property taxed when sold in California?
Gain is generally the sale price minus the stepped-up basis set at death. Federal law treats inherited property as held long term, however soon it is sold. Whether a particular sale owes tax depends on its facts, and a CPA, enrolled agent or tax attorney works out that calculation.
Does Proposition 19 affect the date-of-death value of inherited property?
Proposition 19 does not change the federal basis. It governs reassessment for transfers on or after February 16, 2021, through Rev. & Tax. Code section 63.2. The property's value at transfer is compared with a limit the county assessor's office publishes, and the exclusion requires a timely claim.
What is an alternate valuation date for inherited property?
It is a later valuation date the executor may elect on the federal estate tax return under 26 U.S.C. § 2032. The election is allowed only if it lowers both the gross estate and the estate tax. An individual heir does not make this choice.
Does the stepped-up basis apply if the property passes through a trust?
Generally yes. Property the decedent placed in a trust while keeping the right to revoke it counts as acquired from the decedent under 26 U.S.C. § 1014(b). A CPA or tax attorney reviews how the rule applies to a specific trust.
