Jonathan LopezInherited a Woodland Hills Home: Do I Owe Tax on What the Owner Paid Decades Ago?
Many Woodland Hills homes have been in families for decades, so the original purchase price can be a fraction of today's value. When the owner passes and the heirs sell, the first tax question is usually how much gain they will owe on. The answer depends on the basis.
What the IRS says
IRS Publication 551 (revised December 2025) states that the general rule for inherited property is a basis equal to the fair market value at the date of the individual's death. It also lists the fair market value on the alternate valuation date when the estate's personal representative elects it. For community property, the publication says that when a spouse dies the total value generally becomes the basis of the entire property, if at least half of the community interest is includible in the decedent's gross estate. IRS Topic No. 409, updated September 24, 2026, lists "property acquired from a decedent" among the exceptions to the one-year holding rule and refers readers to Publication 544.
A hypothetical in dollars
Suppose a Woodland Hills home was worth $1,200,000 on the date of death and sells for $1,300,000. The gain measured from the stepped-up basis is about $100,000, before selling costs (my arithmetic, not a forecast). If the original owner had paid $200,000 and the basis did not step up, the same sale would show a gain of about $1,100,000. The numbers are illustrative only.
Why the date-of-death value matters
Because the basis starts at fair market value at death, documenting that value is part of the sale process. A professional appraisal near the date of death is a common way to support it, so ask your CPA or estate attorney what they want on file. The longer the home is held and the more the market rises, the more gain can build above that starting basis.
Local context
Movoto (updated October 16, 2026) shows a $1,299,000 median sale price for September in Woodland Hills, 50 median days on market versus 44 a year ago, 379 active listings and 389 September sales versus 327 a year earlier.
What to do first
Get the date-of-death value documented, ask your tax professional which rules apply to your estate, and then price the home from recent sold comparables near it. California property tax treatment of inherited homes is a separate question covered in my post on Prop 19.
Related reading: my post on Prop 19 and inherited property taxes.
This is general information, not tax or legal advice. Rules differ by estate, trust and community property situation. Confirm with a CPA or estate attorney.
Frequently Asked Questions
What is a stepped-up basis?
For inherited property, the IRS general rule sets the basis at fair market value on the date of death instead of what the original owner paid.
Do I owe tax on all the growth since the owner bought the home?
Generally the gain is measured from the stepped-up basis, per IRS Publication 551, though your situation may differ.
Does it matter how long I hold the home before selling?
IRS Topic 409 lists property acquired from a decedent among the exceptions to the one-year holding rule. Ask your tax professional how it applies to you.
What if the home was community property?
Publication 551 says that when a spouse dies the total value generally becomes the basis of the entire property if at least half the community interest is includible in the decedent's gross estate.
How do I document the date-of-death value?
A professional appraisal near the date of death is a common method. Your CPA or estate attorney can say what they need.
Can you help me price an inherited Woodland Hills home?
Yes. I'll prepare a free market analysis with recent Woodland Hills sold comps.
Thinking about buying or selling in Woodland Hills?
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