Basis of Home - Estate Property

[incumbent]

I'm the administrator and an heir for an estate where the decedent was a PA state resident. I'm trying to determine the "Basis of Home". I did not obtain a real estate appraisal for the property around the date of death in April 2019. The house was in poor condition and I paid for an estate cleanout. I sold the property for approximately $117k almost a year later in March 2020. May I use the 2019 local county real estate tax statement taxable market value of approximately $134k for the "stepped-up basis"? If not, how should I determine the "Basis of Home"?

[KrisD15]

You can use that if you think it makes sense, however you may need to explain why the value went down from date of passing to date of sale. 

If the market declined, that would explain it, but if the market appreciated, the basis of 134k may be too high. 

Consult with an appraiser or real estate broker. 

[M-MTax]

Best would be a proper appraisal. Tax assessments not so much. Better to get a CMA from a RE agent.

[DavidD66]

Tax assessments do not provide accurate fair market values.  They are usually lower than fair market value.   If you used a real estate professional to sell the house, have them prepare a market analysis of the property on the date you inherited it.

[M-MTax]

Not sure what state you own properties in but all of the properties I have owned in a number of different states have been OVER assessed. The assessors like it that way because they can get more tax revenue at higher valuations.......so it's a bad idea to use assessed value no matter what.

[ToddL99]

The most reasonable course of action would be to consider the cost or other basis as equal to the sale price - what you were able to sell it for within a year of the owner's passing is as reasonable an estimate of FMV on date of death as anything else. 

Unless the local real estate market was particularly active (or volatile), the FMV probably didn't change much in the one year that passed between the owner's passing and the sale. You can get verbal confirmation of this from a local realtor - ask for information on changes in the local real estate price index.

The fact that the tax-appraised value was higher supports this approach; if it had been lower than what you sold it for, the IRS could reasonably believe you had a gain on the sale. @DavidD66 stated, assessors are strongly inclined to over-value property for the purpose of increasing tax revenue.

@incumbent