When property is inherited, the basis for the beneficiaries is the value assigned to that property in the estate. Generally, that basis is the value of the property on the date of death of the decedent or on an alternate date selected by the executor of the estate. Thus, any appreciation up to the date of death is forgiven for regular tax purposes and the beneficiary starts with a stepped-up basis. This also applies to property inherited from a spouse. Caution – though infrequent, there is a potential for a step-down in basis as well.