The income tax basis of inherited property is prohibited from exceeding the property’s fair market value as determined for estate tax purposes. Why does this matter? It prevents beneficiaries from arguing that the estate undervalued the property and, therefore, they’re entitled to claim a higher basis for income tax purposes. The higher the basis, the lower the taxable gain on any subsequent sale of the property. Estates are required to furnish information about the value of such property to the IRS and the person who inherits it. Contact us for more details.