Date-of-death and tax-basis appraisals of commercial property in San Francisco

Commercial appraisal services / Date-of-death and tax-basis appraisals

The basis of an inherited building is a value from the past, not today's number.

When an income property passes at death, its tax basis is generally reset to what it was worth on that date. Heirs who sell need that figure to work out gain. Heirs who keep the building need it to depreciate. This page explains the date, the California rule for married owners, and one detail that matters for income property: the split between land and building.

Discuss a date-of-death valuation | Call (415) 529-6155

What a "step-up" appraisal is

The IRS says the basis of property inherited from a decedent is generally its fair market value on the date of death, whether or not the executor files an estate tax return. Its estate tax questions and answers name the law behind that rule as section 1014 of the Internal Revenue Code. Because basis becomes the date-of-death value, it can move down as well as up. "Step-up" is the common name, not a promised tax saving.

A date-of-death appraisal is retrospective. It is researched today and reports a value as of the earlier date, using the leases, the income and the market that existed then.

Three questions today's rent roll cannot answer

Which date?

Generally the date of death. An executor who files a federal estate tax return can elect an alternate date six months after death, or the sale date for property sold within those six months. The Form 706 instructions allow that election only if it lowers both the gross estate and the tax. It cannot be applied to just part of the property, and once made it cannot be revoked.

Which half?

California is a community property state. IRS Publication 551 explains that when either spouse dies, the total value of community property, including the surviving spouse's half, generally becomes the basis of the whole, provided at least half of the community interest is includible in the decedent's gross estate. Whether a building is community property is a legal question. Family Code section 760 states the general rule: unless a statute says otherwise, property acquired by a married person during the marriage while domiciled in California is community property. The California Supreme Court quotes and applies it in In re Brace. Ask your attorney before assuming both halves are adjusted.

Which part is building?

Land cannot be depreciated. IRS Publication 946 says so directly, and Publication 551, in its section on land and buildings bought together, explains that basis is divided between the two so that depreciation can be figured on the buildings. An heir who keeps an income property may be asked by the CPA for the date-of-death value stated as land and improvements. If yours wants that split, say so before the scope is agreed.

Does the estate have to file a federal return?

That depends on the estate, not on the building. For someone who dies in 2026, the Form 706 instructions require a return for a U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $15,000,000, or whose executor elects to pass the unused exclusion to a surviving spouse. Where a return is filed:

• It is due within nine months after the date of death, with an automatic six-month extension available on request.
• Real estate goes on Schedule A, described by street address and block and lot for city property. The instructions say to explain how the reported values were determined and to attach copies of any appraisals.
• Heirs generally receive a Schedule A to Form 8971 showing the estate tax value, and some must use that value as their starting basis.

There is no federal inheritance tax. The federal estate tax falls on the estate and is paid by the executor. California has required no state estate tax return for deaths on or after January 1, 2005, according to the State Controller.

The same date matters to two San Francisco offices

• The Office of the Assessor-Recorder treats the death as a change in ownership and can reassess the property as of the date of death. Commercial property has no parent-child exclusion. See the estate and trust page.
• The Probate Court, if the estate is in probate, receives an inventory in which the building is valued as of the date of death by a probate referee. See the probate page.

A gift is not an inheritance

A building given during life follows a different rule. Publication 551 starts the recipient's basis from the donor's adjusted basis, with the value at the time of the gift also needed. The services page covers that under Gift tax reporting.

What to gather before you call

From the first call to the report

1. Describe the property, the date, the interest and who needs the value.
2. Kevin O'Brien reviews whether the assignment fits and confirms the scope, fee and delivery estimate in writing.
3. You supply the records for the date and arrange access.
4. The report states the interest, the effective date, the intended use and users, and any assumption made where records were missing.

Appraisals are performed by Kevin O'Brien, MAI, SRA, California Certified General Real Estate Appraiser, License #3005065. An appraisal supplies an opinion of value. It does not compute basis, gain or tax, and it does not guarantee that the IRS or any other reader will accept it. Confirm the date, the interest and the use with your attorney or CPA.

Fees and timing

The site's published fee guide says: "Commercial property appraisals in San Francisco with KO Commercial Appraisal San Francisco typically start around $2,000 and can exceed $6,000 for larger or more complex properties, depending on size, use, and unit count." The starting fees by property type and size are in How Much Does It Cost To Appraise A Commercial Property In San Francisco? That guide is not a quote: historical research adds work. If a return is due soon, see rush requests.

Start with the property and the date of death

Tell Kevin which San Francisco property passed, the date, and what your CPA has asked for.

Request the assignment scope | Call (415) 529-6155 | All commercial appraisal services

Published by KO Commercial Appraisal. Appraisals are performed by Kevin O'Brien, MAI, SRA, California Certified General Real Estate Appraiser, License #3005065.

Sources and rules cited on this page were checked on October 8, 2026. This is general information, not legal or tax advice, and not an appraisal of any property.

This page was written with AI assistance for KO Commercial Appraisal.