The general rule is that property in a deceased person’s estate is valued at its fair market value on the date of death. This value sets the estate’s worth for tax purposes and becomes the heirs’ new tax basis in inherited property, commonly called the stepped-up basis. There is one major exception. Under Internal Revenue Code Section 2032, the executor of a taxable estate may elect the alternate valuation date, which values assets six months after death instead. This election is only allowed if it lowers both the total value of the gross estate and the estate tax owed, and it must apply to all assets in the estate, not just some. Property sold within those six months is valued as of the sale date. For most estates that owe no federal estate tax, the date of death value is the one that matters, which is why a retrospective appraisal with that effective date is the standard documentation.
