The key concept is the stepped-up basis, one of the most valuable rules in real estate, and the exact handling belongs with a CPA or estate attorney. When you inherit real estate, you typically receive a stepped-up basis: your cost basis resets to the property's fair market value on the date the previous owner passed away, rather than what they originally paid. That can wipe out decades of gain for tax purposes. - If you sell shortly after inheriting, there may be little or no taxable gain, because your basis is the recent value. - If you keep it as a rental, the stepped-up value becomes your new basis for depreciation going forward. That is why heirs often order a retrospective appraisal valued as of the date of death, using comparable sales from around that time, to document the number. A step-up generally applies whether the property passes through a trust or through probate, and jointly held property can receive at least a partial step-up when one owner dies. The rules carry nuances and have shifted over time, so two pieces of practical advice: keep some form of will, trust, or estate plan in place to make the transfer easier on your family, and bring in a tax professional to set the basis and handle any depreciation correctly.