Stepped-Up Basis Appraisals

What is a Stepped-Up Basis — and Why Does It Matter for Commercial Property in Florida?

If you’ve inherited a commercial property in Florida — or you're advising someone who has — you’ve probably heard the term “stepped-up basis” come up. It may sound like accountant-speak, but it can save heirs and investors hundreds of thousands in capital gains taxes. Whether you're an estate attorney, CPA, heir, or investor, understanding how the stepped-up basis works (especially here in Florida) is crucial for avoiding tax surprises and making smart decisions with inherited income-producing properties.

Understanding the Stepped-Up Basis for Commercial Real Estate in Florida

When commercial real estate is inherited in Florida, it brings with it not only a valuable asset, but also a significant opportunity for tax savings through the stepped-up basis rule. This federal tax provision allows heirs to reset the “cost basis” of the inherited property to its fair market value (FMV) as of the date of death — often eliminating taxable gains accrued during the decedent’s lifetime.

Whether you are an estate attorney, CPA, investor, or personal representative managing an estate, understanding the implications of the stepped-up basis is essential for making informed, compliant, and tax-efficient decisions regarding inherited commercial property.

What Is a Stepped-Up Basis?

The stepped-up basis is a tax rule that adjusts the cost basis of an inherited property to its market value at the time of the original owner’s death. For capital gains purposes, this means the heir is treated as having acquired the property at its current fair market value — not its original purchase price.

Example:

A Tampa-area investor purchased a small office building in 1990 for $400,000. At the time of their passing in 2024, the property is appraised at $2.2 million. If the heir later sells the property for that same $2.2 million, there is no capital gains tax liability — because the sale price matches the stepped-up basis. Had the property been gifted before death, the original $400,000 basis would have carried over, resulting in a taxable gain of $1.8 million.

Why It Matters for Commercial Real Estate

The stepped-up basis can deliver substantial tax relief, particularly for heirs inheriting income-producing or significantly appreciated properties. Key benefits include:

Elimination of Historic Gains: Capital appreciation that occurred during the original owner’s lifetime is effectively erased for tax purposes.
Restarted Depreciation Schedule: The new owner can depreciate the asset based on the stepped-up value — a major advantage for income tax planning.
Accurate Basis for Future Transactions: Whether the property is sold, refinanced, or restructured, a clearly established fair market value ensures accurate reporting and compliance.

Who Benefits?

Heirs of Appreciated Commercial Assets: Individuals inheriting retail centers, warehouses, office buildings, or mixed-use developments that have significantly increased in value will benefit the most from this provision.
Surviving Business Partners or Co-Owners: In certain cases, surviving partners in real estate partnerships or LLCs may receive a basis adjustment on the decedent’s share, which can be critical for succession planning.
Real Estate Investors and Developers: Many investors structure their holdings with the intent of transferring assets at death, allowing their heirs to receive a full basis reset and avoid large capital gains exposure.
Estate Planning Professionals: Attorneys, financial advisors, and CPAs use stepped-up basis strategies to ensure their clients' estates are structured in a tax-efficient manner.

Why a Professional Appraisal Is Essential

The stepped-up basis hinges entirely on the fair market value of the property as of the decedent’s date of death. A professionally prepared commercial appraisal provides the credible, defensible documentation needed to support this valuation.

A qualified commercial appraisal:

Establishes a Legally Compliant Tax Basis: IRS regulations require valuations to be based on substantiated data. Online estimates and tax assessments are not acceptable for estate purposes.
Protects Against IRS Penalties: An inaccurate or inflated valuation can trigger audits and result in significant penalties. A third-party appraisal reduces this risk by providing an independent and well-supported valuation.
Facilitates Asset Distribution: In cases with multiple beneficiaries, an objective valuation aids in equitable distribution or buyouts of inherited interest.
Supports Future Financial Planning: Understanding the current market value of the asset can inform hold/sell decisions, refinancing options, and lease restructuring strategies.

When to Obtain a Commercial Appraisal

A commercial appraisal should be obtained at key points in the estate process:
Immediately Following the Property Owner’s Death: A date-of-death appraisal provides the basis value required for federal tax filings and capital gains calculations.
During Estate Planning: Property owners may obtain appraisals to assess potential exposure to estate taxes or to assist with gifting, trust funding, or business succession planning.
Prior to Selling an Inherited Property: If a date-of-death appraisal was not obtained, a retrospective appraisal can still be commissioned to establish the correct basis.
During Disputes or Legal Proceedings: A certified appraisal is essential if there is disagreement among heirs or scrutiny from tax authorities.

Specialized Expertise for Florida Commercial Properties

Florida’s commercial real estate market is highly dynamic, with regional variations in value influenced by location, zoning, tenant mix, and local economic drivers. Properties in Tampa, Clearwater, Sarasota, and other growing markets have experienced considerable appreciation in recent years.

Because of this, engaging a local, Florida-based appraisal firm with commercial expertise is vital. Appraisers familiar with the nuances of Florida’s market — including seasonal fluctuations, flood zones, and redevelopment potential — can deliver more accurate and defensible valuations.

Partner with a Trusted Commercial Appraiser

At Cliggitt Valuation, we specialize in commercial appraisals for stepped-up basis reporting, estate settlement, and tax planning throughout the state of Florida. Our licensed appraisers deliver detailed, compliant, and timely reports designed to withstand IRS review and support estate professionals and fiduciaries in their work. Whether you are managing a portfolio of retail assets, overseeing a family-owned industrial property, or guiding a client through estate administration, we are here to assist.

Thank you for your interest. Have questions regarding the local market? Navigate the Real Estate Market with confidence, and contact us at Cliggitt Valuation for your appraisal, consulting, and valuation needs today.

Mike Cliggitt, MAI, MRICS, CCIM

813.405.1705 | 863.661.1165 - Direct Lines

findvalue@cliggitt.com

Appraisal & Valuation Markets

Questions about our blog? Contact our Director of Sales & Marketing, Sydney Avolt.

Sydney Avolt

727.403.7418 - Direct Line

sydney@cliggitt.com

< Older Post Newer Post >

SHARE CONTENT

2025 Outlook: Florida’s Property Insurance Recovery & Real Estate Stability

By cliggittvaluation • July 8, 2025

Florida’s property insurance market is finally showing signs of recovery in 2025, following several years of volatility. A combination of legislative reforms and a resilient response to recent storms has begun to steady both residential and commercial insurance rates. For those in the commercial real estate space, this shift offers a much-needed sense of predictability. With fewer surprise exclusions and more stable premium trends, stakeholders can breathe a little easier—even if hurricane season keeps everyone on alert. In this post, we break down the effects of the 2024 hurricane season, 2025 premium trends, key legislative changes, reinsurance market updates, and what these developments mean for property owners, brokers, and investors across the state. After the 2024 Hurricane Season: Resilience in Action

Florida Approves Conservation Purchase of 340 Acres in Hernando County

By cliggittvaluation • June 10, 2025

In a surprising turn, Florida officials voted Tuesday to approve the purchase of 340 acres of forest land in Hernando County from Cabot Citrus, a luxury golf resort once at the center of a heated public lands controversy. This time, there’s no land swap involved—just a straightforward acquisition aimed at expanding conservation efforts near the Withlacoochee State Forest. The vote came from the Florida Cabinet, with Gov. Ron DeSantis, Attorney General James Uthmeier, and Agriculture Commissioner Wilton Simpson all in favor. If Cabot Citrus sounds familiar, it's because the resort drew fire last year after receiving initial approval to trade more than 300 acres of state-preserved forest for land it hoped to develop into more luxury golf amenities. The backlash was swift and widespread. After the Tampa Bay Times reported on the proposed trade, public outcry escalated, and Cabot quietly pulled the deal. Though DeSantis didn’t comment on the Cabot purchase specifically during Tuesday’s meeting, his office later celebrated the conservation deal in a press release, grouping it in with other land buys. Simpson, who previously supported the land swap proposal, offered a lengthy post-vote statement that subtly acknowledged the controversy and praised the new direction: “We paused, looked at alternatives, and ultimately arrived at a better path — one that serves the long-term interests of Florida and its people,” he said. He also commended Cabot for “shifting focus and prioritizing conservation,” calling the outcome a model for how land preservation decisions should unfold. Notably, just weeks ago, Gov. DeSantis was photographed golfing in a Cabot Citrus hat alongside Florida Fish and Wildlife chair Rodney Barreto, further fueling speculation about the resort’s influence. The land now on the table for acquisition sits directly southeast of Cabot’s current footprint—home to multiple golf courses and luxury cottages starting at $1.7 million. It borders the same area the company previously sought to acquire via land swap. The state still needs to appraise the land to determine its value. According to the Florida Department of Environmental Protection, the purchase price won’t exceed the appraised value. If the deal moves forward, the Florida Forest Service has agreed to manage the land and integrate it into the broader state forest system. While many conservationists welcomed the move, they also expressed caution. Eugene Kelly, president of the Florida Native Plant Society and a Hernando County resident, said the shift is promising but remains wary: “It would be great to see the land added to the state forest,” he said. “But I see all these mixed signals coming from the state.” Kelly has also called for full funding of the Florida Forever land acquisition program, urging lawmakers to allocate at least $100 million after earlier budget proposals offered none. After a string of recent land-use controversies—including efforts to develop state parks and transfer pristine conservation land to mysterious LLCs—this decision marks a rare about-face. Whether it signals a long-term commitment to conservation or a one-time course correction remains to be seen. Thank you for your interest. Have questions regarding the local market? Navigate the Real Estate Market with confidence, and contact us at Cliggitt Valuation for your appraisal, consulting, and valuation needs today. Mike Cliggitt, MAI, MRICS, CCIM 813.405.1705 | 863.661.1165 - Direct Lines findvalue@cliggitt.com Appraisal & Valuation Markets Questions about our blog? Contact our Director of Sales & Marketing, Sydney Avolt. Sydney Avolt 727.403.7418 - Direct Line sydney@cliggitt.com

St. Pete Beach Shuts Down Boutique Hotel Proposal

By cliggittvaluation • June 2, 2025

Plans for a 104-room boutique hotel on the east side of Gulf Boulevard were unanimously rejected by St. Pete Beach city commissioners during a May 13 meeting, effectively halting the proposed Windward Pass Resort. The decision denied the developers a conditional use permit, a hardship variance, and access to room credits from the city’s lodging pool. The project, which would have included six stories, waterfront boat access to McPherson Bayou, a three-story parking garage, two pools, a miniature golf course, bars on the ground and rooftop levels, a 12-slip dock, and more, was met with strong opposition. Developers sought 104 temporary lodging unit credits from the district’s 325-room allocation. However, with Hotel Zamora already approved for 64 units, only 261 credits remain for future projects—making this request a significant ask. City Planner Brandon Berry reminded attendees that unlike the western portion of Gulf Boulevard—where lodging is permitted by right—the Bayou Residential District does not allow temporary lodging as a matter of course. “This is not a lodging-permitted area,” he explained. The 2.67-acre site is one of the few remaining large, undeveloped waterfront parcels on the east side of Gulf Boulevard. Despite its size, project architect Jack Boziak argued that the site’s irregular shape—ranging from 293 feet wide on one end to just 125 feet on the other—left less than 40% of the land buildable after accounting for setbacks and drainage requirements. He called this a clear hardship. But commissioners weren’t convinced. Commissioner Betty Rzewnicki emphasized that the lot consists of four separate parcels and is located in a clearly residential area: “You’re trying to introduce a commercial resort into a residential neighborhood. That’s not a hardship—that’s a zoning mismatch.” Commissioner Joe Molholland echoed that sentiment, citing concerns about putting a large hotel with a rooftop bar in a low-density district. “This isn’t the western side of the beach where that kind of activity is expected,” he said. Commissioner Lisa Robinson also pointed to concerns about increased noise, traffic, and overall intensity: “A 104-unit condo hotel with multiple amenities is a lot for this area. The noise and density are already issues. Adding more would overwhelm the neighborhood.” Environmental concerns played a major role as well. Mayor Adrian Petrila specifically called out the potential damage to the shallow bayou and its manatee habitat: “This isn’t just a question of land use—there’s a real environmental impact to consider,” he said. “Even the so-called 'quiet pool' won’t be quiet in practice. I’ve been to enough resorts to know better.” In the end, the commission found that the proposal failed to adequately address community concerns or offer solutions to mitigate the negative impacts. Without clear benefits to the neighborhood and no meaningful compromises presented, all requests—including the rooftop bar and the 104-unit credit allocation—were firmly denied. Source: Tampa Bay Times Thank you for your interest. Have questions regarding the local market? Navigate the Real Estate Market with confidence, and contact us at Cliggitt Valuation for your appraisal, consulting, and valuation needs today. Mike Cliggitt, MAI, MRICS, CCIM 813.405.1705 | 863.661.1165 - Direct Lines findvalue@cliggitt.com Appraisal & Valuation Markets Questions about our blog? Contact our Director of Sales & Marketing, Sydney Avolt. Sydney Avolt 727.403.7418 - Direct Line sydney@cliggitt.com