How to avoid paying capital gains tax on inherited property

Written by  Mel Whitney, EA

Last updated May 15, 2026

Inheriting property in the US doesn't trigger an immediate tax bill – under IRS rules, most inheritances aren't counted as taxable income when you receive them. The tax usually shows up later, when you sell. Six legal strategies can help you avoid capital gains tax on inherited property, ranging from the stepped-up basis to the Section 121 home sale exclusion of up to $500,000 for married couples filing jointly.

This guide walks through each method, the difference between inheritance tax and capital gains tax, and the extra reporting that applies when you've inherited foreign real estate.

Six things to know before you sell:

• Stepped-up basis resets the property's value to its fair market value at the date of death, wiping out any gain that built up during the prior owner's lifetime.
• The $250,000 / $500,000 home sale exclusion is available if you use the inherited home as your primary residence for at least two of the five years before the sale.
• A 1031 exchange applies only to investment or business property – identify a replacement within 45 days and close by the earlier of 180 days or your tax return due date, including extensions. 
• Foreign inherited property must be reported on your US return in USD, and foreign taxes paid may qualify for a foreign tax credit on Form 1116.
• An immediate sale shortens the appreciation window and usually leaves little to no capital gains tax on inheritance owed.
• Keep a date-of-death appraisal or other reliable valuation support so you can substantiate the basis if the IRS questions it.

This article is brought to you by Taxes for Expats (TFX) – a top-rated tax firm serving US citizens, residents, and anyone with US tax obligations, both at home and abroad. Need guidance on capital gains tax when the inherited property sits overseas? Schedule a free discovery call, and we'll review your case and walk you through the next steps.

Stepped-up basis considerations

The stepped-up basis rule is the single most important concept in inherited-property taxation. Under IRC §1014, the basis of inherited property is generally its fair market value on the date of the previous owner's death – or the FMV on the alternate valuation date six months later, if the executor elects that valuation for estate tax purposes.

The practical effect: every dollar of appreciation that built up during the previous owner's lifetime disappears from the heir's tax picture. Only post-death appreciation is taxable when you sell.

If the estate files Form 706 and the property is subject to the consistent-basis rules, beneficiaries generally receive Schedule A (Form 8971) showing the estate tax value they must use as their starting basis.

Documents to keep so you can prove your basis if the IRS asks:

• Written appraisal valuing the property as of the date of death (or alternate valuation date)
• Probate court documents showing the date of death and your inheritance share
• Schedule A (Form 8971) if the estate filed Form 706 and the consistent-basis rules apply
• Receipts and records for any capital improvements you make after inheriting
• Final sale closing statement (HUD-1 or ALTA settlement statement) when you sell

The burden is on the taxpayer to prove the basis, so keeping documentation is essential.  A date-of-death appraisal is one of the most cost-effective ways to protect against a future basis challenge.

How to avoid paying capital gains tax on inherited property

The right way to avoid capital gains tax on inherited real estate depends on what you plan to do with the property. Selling, living in it, renting it, exchanging it, or donating it each lead to different tax outcomes – and several options are only available if the property qualifies under specific IRS rules.

Six legal strategies cover almost every scenario US heirs face when figuring out how to avoid capital gains on inherited property. The summary table below compares them at a glance.

The six methods, ranked by typical complexity and who they tend to suit best:

Each method has its own requirements and tradeoffs. The sections below walk through them one by one.

1. How does selling inherited property immediately avoid capital gains tax?

Selling soon after inheritance is the most reliable way to avoid paying taxes on inherited property. Capital gains tax applies only to appreciation that happens after the date of death, so a quick sale leaves almost nothing to tax.

The previous owner's lifetime gains disappear thanks to the stepped-up basis rule under Section 1014, which resets the property's tax basis to its fair market value (FMV) on the date the previous owner died.

The longer you hold, the more the property can grow past that stepped-up figure – and any growth from that point forward is taxable when you sell. Selling within a few months usually leaves little or no gain to tax.

The same rule applies whether you've inherited a house, a vacant lot, or an inherited piece of farmland abroad. It's also how you avoid capital gains tax on inherited land held purely for investment.

TFX client scenario

A client inherited a Florida home from his mother in February 2025, with a stepped-up basis of $480,000. He sold it in July 2025 for $487,500.

The taxable gain was $7,500. At the 15% long-term rate (inherited property always qualifies for long-term treatment regardless of holding period), federal tax owed was $1,125. Without the stepped-up basis – using his mother's original 1992 purchase price of $115,000 – the gain would have been $372,500.

2. Can I avoid capital gains tax by living in the inherited property?

Yes – moving into the inherited home and making it your primary residence can let you avoid taxes when inheriting a house. Live in it as your main home for at least two of the five years before you sell, and Section 121 lets you exclude up to $250,000 of gain ($500,000 if married filing jointly).

Two conditions are easy to overlook.

The first is the dual ownership-and-use test under IRS Publication 523: you have to own the home AND use it as your principal residence for the same 24 months out of the 60-month window before sale. The two years don't need to be consecutive, but they both have to fall inside that five-year window.

The second is the prior-exclusion rule – the Section 121 exclusion is generally unavailable if you've already used it on another home sale in the preceding two years.

If the property was a rental at the time you inherited it, you'll also need to factor in any depreciation taken during that rental period. That portion doesn't qualify for the exclusion and remains taxable as unrecaptured Section 1250 gain.

We cover the full mechanics in our guide to capital gains tax on the sale of a primary residence in the US and abroad.

3. What is a 1031 exchange, and how does it defer capital gains tax?

A 1031 exchange (also called a like-kind exchange) can defer capital gains on inherited property held for business or investment use, but any cash or other non-like-kind property received can trigger recognized gain. It doesn't eliminate the tax – it postpones it, potentially indefinitely if you keep exchanging properties throughout your lifetime.

When you eventually sell without exchanging, the deferred gain comes due.

There's one strict eligibility rule. Under IRC §1031, like-kind exchanges apply only to real property held for productive use in a trade, business, or investment – not personal-use homes.

If you hold the inherited real estate for investment or productive use in a trade or business after you inherit it, it may qualify for a 1031 exchange; personal-use homes do not. That includes bare land held for investment after inheritance, which is why investors sometimes use this route to avoid paying capital gains tax on inherited land.

The three deadlines that govern every 1031 exchange:

Miss either deadline and the entire exchange collapses – the gain becomes taxable in the year of sale.

Most investors use a qualified intermediary to hold the proceeds, since touching the cash yourself disqualifies the exchange.

4. Does gifting inherited property to heirs eliminate capital gains tax?

No. This is a common misconception. Gifting an inherited property to your children or other heirs doesn't make the tax on an inherited property disappear – it transfers the burden to the recipient.

Under IRS Publication 551 carryover basis rules, the recipient generally takes your adjusted basis – the same basis you had in the property, adjusted for depreciation or improvements, not a fresh fair-market-value step-up. When they eventually sell, gain is calculated against that adjusted basis.

The strategy can still make sense if the recipient sits in a lower capital gains bracket than you do. For tax year 2025, long-term capital gains rates for single filers are:

• 0% up to $48,350 of taxable income
• 15% up to $533,400
• 20% above that

Shifting the eventual sale to a child in the 0% bracket genuinely lowers the family's combined tax bill – but it doesn't avoid tax altogether.

There's also a reporting layer most heirs miss. Gifts above the annual exclusion ($19,000 per recipient in 2025) require Form 709, the federal gift tax return. You generally won't owe gift tax until lifetime gifts exceed the unified credit, but the form still has to be filed.

5. How can an irrevocable trust help avoid capital gains tax?

An irrevocable trust is more useful for estate planning than for capital gains tax avoidance. Trusts can help with estate control, privacy, asset protection, and reducing federal estate tax exposure on large estates – but they don't, on their own, wipe out capital gains tax on inheritance.

What a trust actually does to the tax picture depends on the type:

• Grantor trusts are transparent for income tax. The grantor reports gains and losses on their personal return, so basis and tax treatment look identical to direct ownership.
• Non-grantor irrevocable trusts are separate taxpayers with compressed brackets – for tax year 2025, the 20% capital-gains rate for estates and trusts begins above $15,900; individual thresholds are far higher.

For details, IRS Publication 559 walks through trust and estate income tax basics.

A trust can lock in the stepped-up basis your heirs receive, time distributions strategically, or pair with charitable provisions – any of which may reduce tax. None of those benefits is automatic, though.

Whether a trust helps depends on its terms, who the beneficiaries are, and whether assets sit inside or outside it at death. For US persons with assets abroad, the foreign trust rules add another layer worth checking before structuring anything.

6. Can I donate inherited property to charity and avoid capital gains tax?

Yes – donating inherited property to a qualified charity eliminates the capital gain entirely and gives you an income tax deduction equal to the property's fair market value at the time of donation. No sale, no recognized gain.

This is the cleanest way to not pay taxes on inherited property that has appreciated meaningfully past the stepped-up basis.

The deduction comes with limits, set out in IRS Publication 526:

• 30% of AGI cap on donations of appreciated long-term capital gain property to a public charity (excess carries forward up to five years)
• 20% of AGI cap if the recipient is a private non-operating foundation
• Qualified 501(c)(3) status required – the charity has to be eligible
• File Form 8283 for noncash charitable gifts over $500, and complete Section B with a qualified appraisal for most gifts over $5,000.

This strategy works best for itemizers with strong philanthropic goals and a property that has gained real value since the date of death. The math doesn't favor donating something you could have sold tax-free under the stepped-up basis – if the property is still close to its inherited value, an outright sale is usually simpler.

The difference between inheritance tax and capital gains tax

Most heirs assume "inheritance tax" and "capital gains tax" are the same thing. They're not – they apply at different stages, are paid by different people, and exist at different levels of government. Mixing them up leads to expensive surprises.

Inheritance tax is a state-level tax paid by the beneficiary on the share they receive. As of 2026, only five US states impose it: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. (Iowa repealed its inheritance tax effective January 1, 2025.) The federal government has no inheritance tax.

Estate tax, often confused with inheritance tax, is paid by the deceased person's estate before anything is distributed. For decedents dying in 2025, the basic exclusion amount is $13,990,000; for 2026, it is $15,000,000. Married couples may be able to combine unused exclusion amounts through portability. Above the exclusion, the rate is a flat 40%.

Capital gains tax is a federal income tax that applies when you (the heir) sell inherited property for more than its stepped-up basis. It applies regardless of which state you live in.

A side-by-side comparison of the three taxes that can apply when property changes hands at death:

The key takeaway: you may owe capital gains tax even if no estate or inheritance tax was paid, and the reverse is also true. Most inherited property in the US triggers zero estate or inheritance tax, but it can still generate capital gains tax on inherited real estate when the heir sells.

TFX client scenario

A client inherited a house in California (no state estate or inheritance tax) worth $500,000 in early 2023. No federal or state death tax was owed when she received it – the estate sat well below the $12.92 million federal exemption in effect that year. Three years later, she sold it for $600,000.

She owed federal capital gains tax on the $100,000 of post-death appreciation – not on the full $600,000 sale price.

When do you pay capital gains tax after inheriting property?

Understanding when capital gains tax applies to inherited property helps you plan your strategy effectively. Here are the key scenarios:

Personal use property

If you inherit property and use it as your personal residence, you'll only owe capital gains tax if you sell it for more than its stepped-up basis and don't qualify for the home sale exclusion discussed earlier.

The home sale exclusion allows you to exclude up to $250,000 of capital gains from your taxable income ($500,000 for married couples filing jointly) if you’ve lived in the property for at least two of the five years before selling it.

This strategy can help you avoid capital gains taxes on inherited property by converting it into your primary residence.

Investment property

If you inherit a rental home, vacant land held for income, or any other investment property and rent it out, you face a layered tax picture. Rental income is taxable each year as ordinary income on Schedule E, and the eventual sale triggers capital gains tax on appreciation past the stepped-up basis.

While you hold the property as a rental, you can – and generally must – take depreciation deductions on the building (not the land). IRS Publication 527 walks through the mechanics. Residential rental property is depreciated over 27.5 years, which means a stepped-up basis of $400,000 on the structure produces roughly $14,545 in annual depreciation deductions that offset rental income.

The catch is what happens at the sale. Depreciation reduces your basis each year you take it, so the gain at sale is calculated against a lower number than the stepped-up basis you started with. The portion of that gain attributable to depreciation taken (or that you should have taken, even if you didn't) is taxed as unrecaptured Section 1250 gain at a maximum federal rate of 25% – higher than the standard 15% or 20% long-term capital gains rates.

TFX client scenario

A client inherited a rental in Texas with a $300,000 stepped-up basis (building only, ignoring land for simplicity) in 2021. She rented it for four years, claiming roughly $43,600 in depreciation. When she sold in 2025 for $360,000, her adjusted basis was $256,400 ($300,000 – $43,600). The $103,600 total gain is split into $60,000 of standard long-term capital gain (15% = $9,000) and $43,600 of unrecaptured Section 1250 gain (25% = $10,900) – a total federal hit of $19,900, materially higher than if she'd sold immediately on the date of inheritance.

NOTE! Knowing how to avoid taxes on inherited property that becomes a rental usually comes down to one decision: rent for as short a time as possible, or be prepared for recapture at sale.

Special considerations for foreign inherited property

If you're a US citizen or green card holder who inherits property abroad, the stepped-up basis rules still apply – but the reporting layer is heavier. Even if the entire transaction (death, probate, sale, proceeds) happens outside the US, you must report it on your US tax return. Americans are taxed on worldwide income, including capital gains from selling foreign real estate.

The first reporting trigger most expats miss is Form 3520. If you receive more than $100,000 in aggregate from a nonresident alien individual or a foreign estate during the tax year (cash, property, or both), you must file Form 3520 to report the inheritance itself – separately from any income tax on a later sale.

Missing Form 3520 can trigger different penalties depending on what was not reported: foreign gifts are generally penalized at 5% per month up to 25%, while foreign trust reporting has separate penalties.

The five forms US heirs of foreign property typically need to consider:

• Form 3520 – reports receipt of a foreign inheritance over $100,000 in aggregate during the year
• Form 8949 and Schedule D – report the sale and calculate the capital gain in USD
• Form 1116 – claims the foreign tax credit for any foreign capital gains tax or transfer tax paid on the sale
• FBAR (FinCEN 114) and Form 8938 – required if the sale proceeds sit in a foreign bank account above the relevant thresholds
• Form 706 (rare) – the decedent's estate may need to file if the decedent was a US person with worldwide assets above the basic exclusion amount ($13,990,000 in 2025; $15,000,000 in 2026)

A few practical mechanics:

• Convert all figures (sales price, expenses, basis) into USD using the exchange rate on the date of each transaction, not the date of filing.
• Foreign capital gains tax or transfer tax paid abroad usually qualifies for a US foreign tax credit, but the credit is capped at the US tax owed on that same income – it doesn't always wipe out the US bill entirely.
• The Section 121 home sale exclusion still applies to a foreign home if you meet the two-out-of-five-year test, even if you've never lived in the US.

Selling immediately or renting out

The single biggest factor in your tax outcome is the gap between inheritance and sale. Selling immediately after inheritance typically generates minimal capital gains tax, because there's little time for the property to appreciate beyond the stepped-up basis.

Renting changes the math in two ways. First, rental income is taxable as ordinary income each year, on Schedule E. Second, the depreciation you claim while renting reduces your basis – so when you eventually sell, more of the proceeds count as gain, and the depreciation portion is taxed at the unrecaptured Section 1250 rate (up to 25%) rather than the standard long-term rate.

Most expats in this situation come down on one of two sides: sell within six to twelve months of inheriting and pay almost nothing, or commit to renting for the long term and treat the eventual recapture as the price of the income stream. The middle ground – renting for two or three years and then selling – tends to produce the worst tax outcome relative to either commitment.

Estate or trust sales

If the property is sold by the estate or trust before being distributed to the heirs, the entity (not the beneficiaries) is responsible for any capital gains tax on the sale. This can simplify administration when there are multiple heirs or international beneficiaries – one return, one calculation, one tax bill.

The catch is in the rates. Estate and trust tax brackets are highly compressed compared to individual brackets. A non-grantor trust has compressed brackets – for tax year 2025, the 20% capital-gains rate for estates and trusts begins above $15,900 of taxable income; individual thresholds are far higher.

That means an estate or trust sale can produce higher total tax than if the property were distributed first and sold by individual heirs in lower brackets.

Compare both paths with your tax preparer before the sale closes. The right choice depends on the size of the gain, the number of beneficiaries, their individual tax brackets, and whether the trust has any net operating losses or other items to absorb the gain.

How to report inherited property sale on your tax return

The sale of inherited property gets reported in two main places: Schedule D and Form 8949 of your Form 1040. Both forms ask for the acquisition date (use "INHERITED" in lieu of a specific date – inherited property always qualifies for long-term treatment), the sale date, your stepped-up basis, and the gross sale price. The capital gain or loss flows from Form 8949 to Schedule D and onto your 1040.

Get the basis right. Overstating it to reduce taxable gain triggers the IRS 20% accuracy-related penalty under IRC §6662 when the understatement of tax exceeds the greater of $5,000 or 10% of the tax that should have been shown. The penalty applies even if the error was honest, which is why the appraisal documentation discussed earlier matters.

A few extra forms come into play depending on the property's use and where it sits.

The eight forms most heirs encounter when reporting an inherited-property sale:

A few notes on how these forms interact:

• Form 1099-S is issued by the closing agent at sale, not by the IRS or by you. The dollar figure on it should match the gross proceeds you report on Form 8949 – any discrepancy invites an IRS notice. Report the sale on Form 8949 if you receive Form 1099-S or if any gain is taxable; if you fully exclude the gain and no Form 1099-S was issued, you may not need to report the sale.
• Form 4797 comes into play if the property was rented or used in a business. Gain attributable to depreciation taken (or that you should have taken) flows through Form 4797 first as unrecaptured Section 1250 gain at up to 25%, then to Schedule D.
• Foreign tax credit on Form 1116 offsets US tax on the same gain only up to the US tax owed on that income – the credit can't generate a refund of foreign taxes paid.

If the inherited property was used as your primary residence and qualifies for the Section 121 exclusion, the reporting picture is cleaner. It walks through the $250,000 / $500,000 exclusion, the two-year residency rule, partial exclusions for military service, illness, or job changes, treatment at death or divorce, and rules for non-citizens who renounce.

Capital gains tax avoidance scenarios examples

The five scenarios below show how the strategies above play out with real numbers. Tax outcomes shift quickly with small changes in assumptions, so we've held the variables constant across all examples.

Assumptions used in all five scenarios, unless stated otherwise:

• Filing status: single, with taxable income placing the heir in the 15% long-term capital gains bracket
• No Net Investment Income Tax (3.8% NIIT) – the heir's modified AGI is below the $200,000 single / $250,000 MFJ threshold
• No state income tax or state capital gains tax
• No prior depreciation taken on the inherited property unless explicitly noted
• Federal capital gains tax only – numbers exclude state, local, or foreign tax unless stated

Real returns rarely match these assumptions exactly. Always model your own scenario before acting.

Example 1: Immediate sale with minimal gain

Situation: Sarah inherited her mother's home in Florida, with a stepped-up basis of $450,000 in January 2025. She didn't need the property and sold it in April 2025 for $455,000.

Tax calculation:

• Sale price: $455,000
• Stepped-up basis: $450,000
• Capital gain: $5,000
• Federal capital gains tax owed (15% rate): $750

Result: By selling quickly, Sarah paid $750 in federal tax on $5,000 of post-death appreciation. If her mother's original 1995 purchase price of $150,000 had been her basis, the gain would have been $305,000, and the federal tax bill at 15% would have come to $45,750 – a $45,000 swing in Sarah's favor thanks to the stepped-up basis.

Example 2: Primary residence conversion

Situation: Mark inherited a rental property in Oregon worth $600,000 in early 2023. Instead of selling immediately, he terminated the lease, moved in, and made it his primary residence. He lived in the home as his main residence for two and a half years before selling in late 2025 for $680,000.

Tax calculation:

• Sale price: $680,000
• Stepped-up basis: $600,000
• Capital gain: $80,000
• Section 121 home sale exclusion (single filer): –$250,000 cap (full $80,000 gain absorbed)
• Taxable gain: $0
• Federal tax owed: $0

Result: Mark excluded the entire $80,000 gain under Section 121. Without the residency conversion, he would have owed $12,000 at the 15% rate – or $16,000 at the 20% rate had his income been higher. The strategy worked because he met both the ownership and use tests and hadn't claimed a Section 121 exclusion in the prior two years.

Caveat: If the property had remained a rental for any portion of the time Mark owned it, the depreciation he claimed during that period would not qualify for the exclusion and would have been taxed as unrecaptured Section 1250 gain.

Example 3: 1031 exchange for real estate investors

Situation: Lisa inherited an investment property in Texas with a stepped-up basis of $800,000 in March 2025. She sold it for $850,000 in June 2025 and reinvested all proceeds into two smaller rental properties ($425,000 each) through a properly structured 1031 exchange. She identified the replacement properties in writing on Day 30 and closed on both by Day 165.

Tax calculation:

• Capital gain: $50,000
• Tax deferred via 1031 exchange: $50,000 of gain
• Immediate federal tax owed: $0
• Tax deferred (15% rate): $7,500 (would have been $10,000 at the 20% rate)

Result: Lisa deferred all federal capital gains tax while diversifying into two properties with better individual cash flow. The deferred gain attaches to her new properties' basis, so the tax becomes due if she eventually sells without exchanging again. Continuing to exchange throughout her lifetime postpones the tax indefinitely, and at her death, the next generation gets a fresh stepped-up basis.

Example 4: Foreign inherited property

Situation: James, a US citizen living in Germany, inherited his grandmother's apartment in Berlin with a stepped-up basis of €300,000 in February 2025. He sold it one year later, in February 2026, for €320,000. Germany imposed its 25% capital gains tax on non-primary-residence sales held under 10 years, charging €5,000 on the €20,000 gain.

Tax calculation (using the Treasury Reporting Rate of Exchange of approximately €1 = $1.10 for the date of sale):

• Sale price in USD: $352,000
• Stepped-up basis in USD (translated at the date of inheritance, not sale): $315,000
• Capital gain in USD: approximately $22,000 (after factoring in exchange-rate movement between inheritance and sale)
• US federal capital gains tax owed (15% rate): $3,300
• German tax paid: €5,000 ≈ $5,500
• Foreign tax credit on Form 1116, capped at US tax on the same income: $3,300
• Net US tax owed: $0
• Excess foreign tax credit ($5,500 – $3,300 = $2,200): carried forward up to 10 years

Result: The foreign tax credit fully offset James's US tax on the gain, so he owed nothing extra to the IRS – but he still had to file Form 1116 to claim the credit and report the sale on Form 8949 and Schedule D.

The FTC doesn't always wipe out the US bill. The credit is capped at the US tax owed on the same category of income. When the US gain is larger than the foreign-country gain (because of exchange-rate movement, deductible costs, or different basis treatment), or when NIIT applies, US tax can exceed foreign tax. In those cases, the heir owes the difference. Excess foreign tax can be carried back one year or forward up to 10 years against future foreign-source income tax.

For the official exchange rates the IRS accepts, use the US Treasury Reporting Rates of Exchange or any published rate that's used consistently.

Example 5: Charitable donation

Situation: Patricia inherited a commercial property in California with a stepped-up basis of $1,200,000 in early 2025. She had no plans to use the property, expected significant future appreciation, and had strong charitable inclinations. Rather than sell, she donated the property directly to a qualified 501(c)(3) public charity in late 2025. Her annual AGI is approximately $850,000 from her primary business.

Tax calculation:

• Capital gain recognized: $0 (no sale occurred)
• Income tax deduction at fair market value: $1,200,000
• 30% of AGI annual deduction limit: $255,000 in year 1
• Excess deduction carried forward: $945,000 over up to five additional tax years
• Tax benefit at her 37% marginal rate (over six years): approximately $444,000

Result: Patricia eliminated capital gains tax entirely on the donated property and generated $1,200,000 in itemized deductions, used over six tax years, thanks to the 30% AGI cap and the five-year carryforward. The strategy worked because her AGI was high enough to absorb the deductions before the carry-forward expired – at lower income levels, a portion of the $1.2 million deduction can simply lapse unused.

She was also required to file Form 8283 (required for noncash gifts over $500), completing Section B with a qualified appraisal (required for most noncash gifts over $5,000).

How can you save the most on taxes when you inherit property?

The biggest tax savings on inherited property come from four decisions made in the right order – ideally within the first six months after inheritance, well before any sale. Most heirs lose money not by paying too much tax, but by skipping a step (no appraisal, no Form 3520, no advance modeling) that locks in a bad outcome they can't undo later.

Across every scenario in this guide, the same four moves drive outcomes:

• Establish your stepped-up basis in writing. Get a date-of-death appraisal before anything else. Without documentation, the IRS doesn't have to take your word for it on the FMV under IRC §1014, and a date-of-death appraisal is one of the most cost-effective protections against a basis dispute later.
• Choose how you'll use the property. Immediate sale, primary residence conversion, rental/investment use, exchange, gift, trust, or donation all lead to different tax paths. The decision should match your cash needs, family goals, state tax exposure, and whether the property is domestic or foreign.
• Run the numbers before you sign. Model the sale under Form 8949/Schedule D, possible depreciation recapture, Section 121 eligibility, 1031 timing, and any foreign tax credit. The difference between selling this year and next year can be thousands of dollars.
• File every required form. A low-tax outcome can still become expensive if the reporting is missed. Form 3520, FBAR, Form 8938, Form 1116, Form 4797, Form 8949, and Schedule D each have separate triggers and penalties.

Cross-border situations add layers most domestic tax preparers don't routinely handle: USD basis translation at the date of inheritance, exchange-rate movement between inheritance and sale, foreign tax credit limitations, foreign asset reporting, and different estate systems overseas.

Our team specializes in exactly this. From stepped-up basis calculations to foreign currency conversions and the full IRS reporting stack, we walk US heirs through the decision points before any of them get locked in.

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