IRS Tax for STepped-up Basis

A Michigan home, a federal basis rule and a date in the past

The basis rule behind a "step-up" is federal law, so it reads the same for a house in Grand Haven, Holland or Muskegon. What a Michigan family needs from an appraiser is a well-supported value for the house on the date that rule points to, which is usually the date of death. A retrospective appraisal develops that opinion of value from the market as it stood on that date, not from today's prices.

The federal rules in plain words

Basis of inherited property. When a house comes to you from someone who died, your starting basis is generally what the house was worth, at fair market value, on the day of death (26 U.S.C. 1014(a)(1); IRS, gifts and inheritances). Selling later for more than that figure produces a taxable gain. The statute uses the date-of-death value without regard to what the owner originally paid, so the word "step-up" is not a promise of a tax saving.
The elective alternate date. A different date, the alternate valuation date in 26 U.S.C. 2032, replaces it only when the executor makes that election on the estate tax return, and section 2032 permits that election only if it reduces the gross estate's value and also reduces the total of estate tax and generation-skipping transfer tax.
Matching the estate tax value. A 2015 federal law requires, in certain circumstances, that an heir's basis in inherited property line up with the value finally settled for federal estate tax purposes.
A lifetime gift is not an inheritance. A home given away while the owner is alive generally keeps the giver's adjusted basis in the hands of the person who receives it (26 U.S.C. 1015(a); IRS Publication 551), not its market value on the day of the gift. The date-of-death value applies to property acquired from a decedent.
Spouses who owned the house together. Michigan is not a community-property state, so the rule that gives the survivor's half of community property a new basis does not apply here. Where spouses held the home as a qualified joint interest, Publication 551 puts half of its value into the gross estate of whichever spouse dies first, regardless of who paid for it. How that carries through to the survivor's basis is a question for your tax adviser; this page does not promise a full step-up.

What Michigan adds, and what it does not

Michigan's own death taxes do not reach current estates: its inheritance tax covers only deaths on or before September 30, 1993, and its estate tax has not been collected since 2005, so there is no separate state death-tax value to line up with.
Federally, heirs face no inheritance tax. The estate tax is the estate's own liability, settled by the executor, and applies only past the annual threshold: $15,000,000, the IRS amount used for a U.S. citizen or resident who dies in 2026, while estates far below that line still need a date-of-death value for the heirs' basis.
If the estate goes through probate, the personal representative's inventory lists the home at its date-of-death fair market value within 91 days after appointment (MCL 700.3706). Whether one report can serve both the inventory and the basis records is a question to put to your adviser and the appraiser.
A Michigan assessment is not a date-of-death market value. Assessed value is half of true cash value, and taxable value is capped until a transfer (MCL 211.27a), so those figures are a prompt for questions, not an answer.

Your tax adviser should identify the effective date and the use before the report is ordered. An appraisal supplies an opinion of value, not a tax result.

Pin down the day, the house and the sales

Which day the report is dated to

Usually the date of death; the alternate valuation date only if the executor elects it. The report carries one effective date, so settle it first.

What shape the house was in

A house renovated, emptied or damaged since the death is valued as it was on the effective date. Dated photos, listing records, inspection reports and invoices help the appraiser separate then from now.

Sales from that time

Sales close in time to the effective date carry the most weight. For a Grand Haven house, that can mean sales from the same part of the city around that date; a Holland or Muskegon house is measured against its own market.

Local records worth pulling

How title was held. Whether the owner held the house alone, jointly with a spouse or through a trust affects the questions above, and the recorded deed is the first place to look. The Ottawa County Register of Deeds offers a document search, and Muskegon County's Register of Deeds records real-property documents for that county.
The assessing record. For Grand Haven, that means Ottawa County, which handles the city's assessing under contract; in Muskegon County, each local assessor sets individual assessments, and the county Equalization Department works with those township and city assessors; in Holland, the city's Assessing Office. If you have the property record, send it; the appraiser compares it with the inspection.

Five things to line up first

Street address, kind of property and the decedent's date of death.
The valuation date named by your adviser, plus everyone who will read the report.
Dated photos, an old listing, inspection reports or invoices showing the home's condition then.
A list of changes made since, with approximate dates.
The deadline, and who can give access.

A look-back assignment, stage by stage

Fix the assignment's terms. Property, purpose, intended users, effective date and deadline, with the scope, fee and delivery estimate agreed in writing.
Put the house on record. After the visit, the appraiser reviews your dated photos and records against what the house shows today.
Research that market. Sales from the period around the effective date are pulled, adjusted for differences, and brought together into one opinion of value.
Reading the delivered report. Check that the report states the right effective date and intended use, read its assumptions and limiting conditions, and send any factual errors back to the appraiser.

Price and schedule for a date-of-death report

For a date-of-death report on a Michigan house, ask for a written scope, fee and delivery estimate, ideally with your adviser's valuation date already in hand. An older date, thin records of the home's past condition, an unusual property and a short deadline can each add time. For the probate side of the same value, see probate appraisals; for settling or dividing an inherited home, see estate appraisals.

Start with the address and the effective date

Call 231-638-4774 or request a quote; the street address, the tax question behind the request and your adviser's valuation date are all we need to begin.