Code section · 1954
IRC §1014
26 U.S.C. §1014; Treas. Reg. §§1.1014-3(e), 1.1014-4(a)(1); IRC §§2032, 2040(b), 168(f)(5), 168(k)(2)(E)(ii), 179(d)(2)(C); Treas. Reg. §1.168(k)-2(b)(3)(iii)(A)(2); IRS Pub 551
Internal Revenue Code
What it holds
Property acquired from a decedent takes a basis equal to its fair market value at death, or on the alternate valuation date under §2032 if the executor elects it (only when that lowers both the gross estate and the estate and GST tax). Where Form 706 was required, the heir's basis must match Form 8971, Schedule A. The heir is a new taxpayer for depreciation: the property is newly placed in service, with a full recovery period, and the anti-churning rules do not apply (§168(f)(5)). Bonus depreciation and §179 are not available for §1014 basis (§179(d)(2)(C); Treas. Reg. §1.168(k)-2(b)(3)(iii)(A)(2)). Community property: both halves are stepped up if at least half was included in the decedent's estate (§1014(b)(6)), so the survivor restarts one schedule on the full value. A spousal qualified joint interest (§2040(b)): only the decedent's half is stepped up; the survivor's own half keeps its original schedule, and the inherited half starts a new one (Pub 551).
Why it matters for your study: Inherited rentals. A study can allocate the full stepped-up basis (the whole value for community property). If the heir's first return already treated it all as building, one filed return can generally be amended; after two, it is a Form 3115 method change (Rev. Rul. 90-38).
- Category
- Methodology & procedure
- Applies to
- All property types
- Status
- Vetted
This page explains a tax authority in plain words. It is not tax advice for your situation. Joel Salas, our Director of Tax, signs every study. Citation is provided so you or your advisor can read the primary source.