Selling a parent’s home after they pass away can feel like the simplest part of a difficult process, but it’s becoming one of the most closely watched financial moves. The IRS is paying more attention to inherited property sales, and small mistakes are triggering audits that many families never saw coming. From valuation errors to reporting gaps, one misstep can lead to penalties or unexpected tax bills.
The IRS isn’t randomly auditing inherited homes. It focuses on areas where mistakes are common. One of the biggest issues involves how people calculate taxes after selling inherited property. When a home is inherited, its tax basis typically resets to the fair market value at the date of death. This rule, known as the step-up in basis, can reduce or eliminate taxes, but only if applied correctly.
