I Inherited a Redondo Beach Duplex. Do I Get a Stepped-Up Basis?

Published July 15, 2026

Yes. Inherited South Bay rentals get a fresh cost basis at date of death value, and a new 27.5 year depreciation clock, separate from the Prop 19 tax question.

If you inherited a Redondo Beach duplex, your cost basis resets to its fair market value on the date the prior owner died, under Internal Revenue Code section 1014. That step up eliminates the decedent's old depreciation and any built in gain, and it starts a brand new 27.5 year depreciation schedule for you as the new owner. This is a separate question from whether your property tax bill gets reassessed under California's Proposition 19, which it almost always will for a rental.

Two different systems, two different answers

Owners get tripped up because they are really asking two questions at once. One is federal income tax basis, governed by IRC section 1014. The other is California property tax assessment, governed by Proposition 19. They do not move together, and a rental duplex gets the less favorable answer on the property tax side.

How the stepped-up basis works

Under section 1014(a), property acquired from a decedent generally takes a basis equal to its fair market value on the date of death, or on the alternate valuation date if the estate elects one under IRC section 2032. Practically, that means whatever the prior owner originally paid for the duplex, and whatever depreciation they had already claimed, disappears for your purposes. You start over.

That reset basis then gets depreciated as new property. For a residential rental duplex, that means a fresh 27.5 year straight line schedule under the MACRS rules in IRC section 168, running from the date you inherited it, not from when the building was originally placed in service decades ago. If a professional appraisal or a formal estate valuation set the fair market value at, say, 1.6 million dollars for the building and land combined, the portion allocated to the building is what you now depreciate over 27.5 years.

A cost segregation study can be run on this stepped-up basis too, which for a South Bay duplex can pull components like flooring, certain site improvements, and specific fixtures into 5, 7, or 15 year categories instead of the standard 27.5 year residential schedule, accelerating deductions further.

Depreciation recapture does not follow you

One of the real benefits here: the decedent's accumulated depreciation recapture exposure under section 1250 dies with them. You are not on the hook for the depreciation they already claimed. Your recapture exposure, if you eventually sell, starts fresh based only on depreciation you personally claim going forward on the new basis.

Now the property tax side, which is where owners get surprised

Proposition 19, effective February 16, 2021, narrowed the old parent child exclusion from reassessment that existed under Proposition 58. Today, the exclusion from property tax reassessment for a parent to child transfer applies only to a home that qualifies as the transferor's principal residence, and only if the child moves in and claims it as their own primary residence within one year, filing form BOE-19-P with the county assessor. A South Bay rental duplex that was never the parent's primary residence gets none of that protection. It is reassessed to full current market value as of the date of death, which for most inherited investment property in this market means a meaningfully higher assessed value and a higher annual property tax bill going forward.

Even where the exclusion does apply to a genuine family home, it is capped: the excluded increase in assessed value is limited to 1,044,586 dollars above the parent's factored base year value for transfers occurring from February 16, 2025 through February 15, 2027, a figure the State Board of Equalization adjusts every two years for inflation.

What this means for you

Expect two separate hits to land at different times. Your income tax basis for depreciation and future capital gains is good news: it reset higher, tax free, at the moment you inherited. Your property tax bill is the less welcome part: absent a qualifying primary residence exclusion, the Los Angeles County Assessor will reassess the duplex to current market value, and your new secured property tax bill will reflect that higher assessment going forward. Talk to a CPA about documenting the date of death value carefully, since that appraisal drives your depreciation deductions for the life of your ownership.

If you would rather not track basis, depreciation schedules, and assessor notices yourself, that is what we do for owners across the South Bay.

This is general information, not legal or tax advice. Confirm with a licensed professional before you act.

Sources

1. 26 U.S. Code section 1014, Internal Revenue Code (Cornell LII)
2. IRS Publication 551, Basis of Assets
3. California State Board of Equalization, Proposition 19
4. Los Angeles County Assessor, Proposition 19
5. 26 U.S. Code section 168, MACRS depreciation (Cornell LII)
6. IRS Cost Segregation Audit Techniques Guide

Last verified: July 2026.

Topics: taxes, inherited property, depreciation, stepped-up basis, Prop 19

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Schofield Properties is a family run property management company at 323 Richmond St, El Segundo, CA 90245. We have managed the South Bay since 1972 and personally oversee about 186 doors today. Book a call to talk about your property.