Legal Question in Real Estate Law in Arizona
As you know, the IRS says that if you sell an inherited house above the cost basis, which is supposedly determined at the time of death of the benefactor, you must pay a capital gains tax on that gain. Okay, fine. My question is, how & who determines what that cost basis is? Is there some magical and mystical 3rd party out there who has made a determination on exactly what that cost basis is. I’m dumbfounded. Can you shed any light on why I can't understand what the IRS is after here?
1 Answer from Attorneys
In this scenario, fair market value of the decedent's house on the date of death is based on sales of comparable homes. Yes of course real estate brokers and professional appraisers use some subjectivity based on their experience in the business, but it's not "magical and mystical" in any way.
Good luck.
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