When you inherit property, it’s easy to assume everything’s settled. However, missing or misreporting key tax details can lead to unexpected liability. At Gabaie & Associates, LLC, we help clients uncover these blind spots before they become costly.
What is the Tax Basis of Your Inherited Asset?
For most inherited assets, your tax basis is reset to the fair market value (FMV) at the date of the decedent’s death (or alternate valuation date if approved).
If you sell the asset for more than that basis, you have a taxable gain. If you haven’t accurately established that FMV, you risk understating your gain—or worse, triggering penalties for mis-reporting.
Reporting Obligations Go Deeper Than You Think
While you don’t pay tax simply for inheriting property, you do need to account for the asset properly when you dispose of it. If the estate filed a return or the executor reports values on Form 8971/Schedule A, you must use that value for your basis.
If you don’t, you may accidentally take a basis that’s higher than permitted and trigger a penalty from the IRS.
Doing Nothing Could Cost You More
Mistakes often stem from simply treating the inheritance as a “gift” or financial windfall and failing to record the FMV on the date of death, maintain proper documentation, or engage tax advice. That oversight can turn into unnecessary capital gains tax or penalties. It can also create a lot more stress for you and your beneficiaries.
Report Your Inheritance Properly with Professional Tax Help
If you’ve recently inherited an asset and you aren’t sure what your reporting requirements are, our Maryland tax attorneys can help. We assist taxpayers in Baltimore, Columbia, Frederick, Rockville, and throughout the state with a wide range of tax issues. At Gabaie & Associates, LLC, we can act early in inheritance cases. We review estate documents, verify basis, assess sale or retention strategies, and ensure the right numbers go on the return.
Call us today at (410) 358-1500 or fill out our contact form for a free consultation. Don’t let what seems like “free” property become a hidden tax liability. Your next move matters.
