IRS Step-Up and Date-of-Death Appraisals in Los Angeles
Past-date commercial property valuations for heirs, trustees, executors and their CPAs
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You inherited a Glendale retail building. What was it worth on the date of death, and who needs that number?
The IRS says the basis of property inherited from a decedent is generally its fair market value on the date of death, whether or not the executor files an estate tax return. Basis is the figure a later sale is measured against: sell for more than your basis and you have a taxable gain. The adjustment follows the market, so it can run down as well as up.
The appraisal behind that figure goes by several names: step-up, date-of-death, retrospective. Each means an opinion of what a named property interest was worth on that past day. For a leased building it is built from the leases, rents and market evidence of that time, not from today's rent roll. Your CPA or attorney names the date and the use; the appraisal supplies a value opinion, not the tax result.
IRS, Gifts and inheritances and IRS Publication 551 (12/2025), Basis of Assets, both checked October 8, 2026.
Is there an inheritance tax on the building?
There is no federal inheritance tax. The federal tax is the estate tax. It is levied on the estate as a whole, not on one heir's share, and the executor reports it on Form 706. For a U.S. citizen or resident who dies in 2026, Form 706 must be filed when the gross estate plus adjusted taxable gifts and specific exemption is more than $15,000,000, or when the executor elects to pass the unused exclusion to a surviving spouse. Schedule A of that return tells the executor to explain how real estate values were determined and to attach copies of any appraisals. The return is due within nine months after the date of death unless an extension is granted.
California has no inheritance tax, and no California estate tax return is required for deaths on or after January 1, 2005. The inheritance itself generally is not income to you. Rents the building produces afterwards are. Confirm with your attorney or CPA whether a return is due.
IRS Instructions for Form 706 (07/2026) and IRS Publication 525 (2025), Taxable and Nontaxable Income, both checked October 8, 2026.
California adds two things
Community property
Family Code section 760 treats property acquired by a married person during the marriage, while domiciled in California, as community property unless a statute provides otherwise. That label carries federal weight. Publication 551 says that in community property states, California among them, when either spouse dies the total value of the community property, even the surviving spouse's part, generally becomes the basis of the entire property, provided at least half of the community interest is includible in the decedent's gross estate. A surviving spouse may therefore need a date-of-death value for the whole building, not half of it.
Whether a particular building is community property turns on facts beyond the names on the deed, and joint tenancy follows a different calculation. Confirm with your attorney or CPA.
California Supreme Court, In re Brace (2020), quoting Family Code section 760, checked October 8, 2026.
Reassessment by the County Assessor
The same date drives property tax. Under Proposition 13 the county assessor reassesses real property to its current fair market value as of the date ownership changed, and for an inheritance that date is the date of death (Property Tax Rule 462.260). Transfers between spouses are excluded. A parent-to-child transfer of commercial property is not: the State Board of Equalization says commercial property transferred on or after February 16, 2021 does not qualify for the Proposition 19 parent-child exclusion, which is limited to a family home or family farm. Revenue and Taxation Code section 480 sets when the change in ownership statement is due: within 150 days of the date of death where there is no probate, or with the inventory and appraisal where there is one.
Here the reassessment is made by the Los Angeles County Office of the Assessor, which sends a Notice of Supplemental Assessment. Its figure and an appraiser's date-of-death opinion are separate conclusions for separate uses. To contest it, the Los Angeles County Assessment Appeals Board lists a filing period of 60 days from the mailing date printed on the supplemental notice or tax bill, or the postmark date if later; see property tax appeal appraisals. A building held through an LLC or partnership follows the Board of Equalization's separate legal-entity rules; ask your attorney which filing applies.
State Board of Equalization, Change in Ownership: Frequently Asked Questions, Property Tax Rule 462.260, Legal Entity Ownership Program and Los Angeles County Assessment Appeals Board, filing periods, all checked October 8, 2026.
Three questions today's rent roll cannot answer
Which date?
The date of death, unless the executor elects alternate valuation on Form 706. Property still held by the estate is generally valued six months after death. Property distributed, sold, exchanged or otherwise disposed of within those six months is generally valued on that earlier date. It is allowed only if it lowers both the gross estate and the tax, it cannot be applied to only part of the property, and once made it cannot be revoked. The choice belongs to the estate's adviser, never to the appraiser.
Which interest?
The whole building, an undivided share, or an interest in a company that owns it. A report on the entire property does not by itself value a part interest.
Which facts?
Leases in force, rents collected, vacancies, expenses and condition on that date. Later leases and renovations are recorded as later events.
What to gather before calling
| Bring or describe | Why it helps |
|---|---|
| The date of death, your adviser's written instructions and any due date | Fixes the effective date, the use and the recipient before research starts. |
| Address, Assessor's Identification Numbers (AINs) and the deed or trust pages showing title | Identifies the parcels and the interest that passed. |
| Rent roll, leases, operating statements and dated photographs from that time | Establishes income, expenses and condition at the effective date. |
From the first call to the report
- Describe the building, the interest that passed, the date and who will rely on the report.
- Kevin O'Brien reviews the assignment and sends a written scope, fee, and delivery estimate.
- You supply the dated records and arrange access.
- Kevin researches the market as it stood on the effective date and delivers the report to the agreed recipient.
Reports are USPAP-compliant. USPAP governs how the work is done; it does not oblige the IRS, the Assessor or a court to adopt the value.
Fees and timing
The home page says: "Typical fees range from $2,000–$4,000." The cost article says of the site's published fees: "These are starting prices for standard current-value assignments and can increase for larger or more complex properties." A past-date assignment is not a current-value assignment, so get the fee for your building in writing. On timing the About page says: "Standard delivery in 1–3 weeks, with rush appraisals available for urgent deadlines." If a filing date is near, read rush appraisals.
Related: probate appraisals, estate planning appraisals, gift tax appraisals and all commercial appraisal services.