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Rhode Island Step-Up in Basis Explained
Support GuideRhode Island27 min read

Rhode Island Step-Up in Basis Explained

Rhode Island keeps the house out of the probate inventory, so Form RI-706 is where an inherited property's date-of-death value gets written down.

By Settled Editorial

When you inherit Rhode Island property, its cost basis resets to the fair market value on the day the owner died. That reset comes from Internal Revenue Code § 1014, and it erases the capital gains tax on a lifetime of appreciation. You owe tax only on growth after the death, and only when you sell.

Rhode Island adds no basis rule of its own. What the state decides is where your number gets written down, and Rhode Island is unusual here. R.I. Gen. Laws § 33-9-1 keeps real property out of the probate inventory by its own terms, and § 33-9-4(a) lets the executor appraise everything else without an outside appraiser. The one Rhode Island document that carries a date-of-death value for the house is Form RI-706, and every estate of a decedent who died on or after January 1, 2015 files one whether or not a dollar of tax is due. This guide walks through where the number lives, how to work out your adjusted basis, what steps up and what does not, and how Rhode Island taxes the gain when you sell. Read it alongside the Rhode Island probate guide and the Rhode Island executor duties guide.

What a Step-Up in Basis Does

Basis is what the tax system treats as your cost in an asset. When you sell, you owe capital gains tax on the sale price minus that basis. The step-up changes the starting number for anything you inherit.

The problem it solves

Say your mother bought a ranch in Warwick in 1991 for $96,000. At her death in 2026 it is worth $438,000. If she had deeded it to you while she was alive, you would take her $96,000 cost, called a carryover basis, and a sale at $438,000 would show a $342,000 gain.

How the reset works

Because you inherited the house instead, your basis steps up to the $438,000 date-of-death value. Sell at $438,000 and your gain is $0. Sell a year later for $459,000 and you report a $21,000 gain rather than $363,000.

Where the rule comes from

IRC § 1014(a)(1) gives property acquired from a decedent a basis equal to its fair market value at the date of the decedent's death. Nothing in the Rhode Island General Laws changes that number, raises it, or lowers it. Any page that offers you a Rhode Island step-up rule is describing something the state does not have.

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The Rhode Island Probate Inventory Leaves Out the House

Most states put a date-of-death value for every asset, land included, into a court-filed inventory. Rhode Island does not, and executors who assume otherwise lose the house number.

R.I. Gen. Laws § 33-9-1 tells the executor or administrator to return to the probate court, under oath, within 90 days after appointment or such longer period as the court allows, a true inventory of all the personal property, both tangible and intangible, and of all claims, rights, causes of action and other assets, other than real property, of the deceased, with an appraisement as of the date of the decedent's death.

Read that list twice. Bank accounts, brokerage holdings, the car, jewelry, a share in a family business and a lawsuit the decedent had going all land in the inventory with a sworn date-of-death appraisal attached. The house does not.

Section 33-9-4 then sets who does the appraising. Subsection (a) says the property comprised in the inventory shall be appraised by the executor or administrator. Subsection (b) lets the court, on the petition of any party in interest, appoint one or more sworn appraisers to value assets named in the petition. So the default Rhode Island appraisal is the fiduciary's own opinion, and an independent appraiser arrives only when somebody asks the court for one.

Two things follow for anyone who will sell later:

  • Order a written date-of-death appraisal for the real estate yourself. A licensed Rhode Island appraiser can value a property as of a past date, and the report costs far less in month one than the tax on a number you cannot defend in year seven.
  • Use § 33-9-4(b) when heirs disagree. A petition for court-appointed appraisers turns a contested figure into a sworn one, and it costs less than a later fight over who understated what.

Form RI-706 Is Where a Rhode Island Date-of-Death Value Gets Written Down

Rhode Island makes up for the inventory gap somewhere else, and this is the part most families never hear about.

R.I. Gen. Laws § 44-23-1(a) requires every executor, administrator and heir-at-law, within nine months after the death, to file with the tax administrator a statement under oath showing the full and fair cash value of the estate, the amounts paid out for claims, expenses, charges and fees, and the names and addresses of everyone entitled to take a share. The Division of Taxation implements that statement as Form RI-706, and its published rule is blunt: beginning January 1, 2022, all estates of a decedent dying on or after January 1, 2015 use Form RI-706, taxable or not.

Section 44-22-1.1(d) then ties the numbers together in one sentence. All values are as finally determined for federal estate tax purposes. The value on the Rhode Island return is not a separate state appraisal exercise. It is the same fair market value that federal law uses, which is the same value IRC § 1014 hands you as basis.

The Division lists three reasons a non-taxable Rhode Island estate still files:

  • To obtain a discharge of the automatic statutory lien that attaches to all real estate the decedent owned at death
  • To obtain a Notice of No Tax Due for probate court purposes
  • To obtain a waiver allowing the sale of Rhode Island securities, including Rhode Island incorporated stock, state and municipal bonds, and mutual funds organized as business trusts doing business here

A non-taxable estate completes pages one and two and a small portion of page four. That is a short filing, and it produces the durable Rhode Island record of what the property was worth the day the owner died.

One live trap on the filing fee. Section 44-23-1(b) charged $50 with each statement for estates of decedents with a date of death before January 1, 2025, and § 44-23-1(c) says no fee is due for a date of death on or after that. The Division's own FAQ states that split correctly, and then its list of RI-706 attachments still tells you to enclose a check for $50. The statute governs. Confirm the current amount with the Division before you mail anything.

Keep a full copy of the filed RI-706 and every schedule with your own records. Ten years from now it is the fastest proof of your basis that exists.

Working Out Your New Basis

Step 1: Pin the date-of-death value

How you support each figure depends on the asset:

  • Real estate: order a date-of-death appraisal from a licensed appraiser while the trail is warm. Nothing in the Rhode Island probate file will do this for you.
  • Publicly traded stock: average the high and low trading price on the date of death. When that day fell on a weekend or holiday, the federal rule takes a weighted average of the means on the nearest trading dates before and after, weighted inversely by how many trading days each sits from the death.
  • A closely held business: get a professional valuation. This figure also feeds the § 33-9-1 inventory, so getting it right serves two filings.
  • Bank and brokerage accounts: ask each firm for a date-of-death statement. Most produce one on request.

Step 2: Check the alternate valuation date

An executor who files a federal estate tax return can elect the alternate valuation date under IRC § 2032, which values the estate six months after death. It never raises basis. Section 2032(c) bars the election unless it decreases both the value of the gross estate and the estate tax, so it only moves values down, and § 2032(d)(1) says the executor makes the election on the federal return. Rhode Island follows whichever figure results, because § 44-22-1.1(d) takes values as finally determined for federal estate tax purposes.

The IRS puts the federal filing threshold at $15,000,000 for a 2026 death, so almost no Rhode Island estate files a federal Form 706 and almost every heir uses the date-of-death value.

Step 3: Add what you put in

Capital improvements you make after inheriting raise your basis: a new roof, an addition, a kitchen remodel, or site work. Keep the receipts. Routine repairs do not count, so track improvements and repairs separately.

ItemAmount
Date-of-death value (your stepped-up basis)$438,000
New roof and gutters+$16,400
Kitchen remodel+$24,000
Adjusted basis$478,400
Sale price$515,000
Broker commission and closing costs-$31,000
Capital gain you report$5,600

What Steps Up and What Does Not

What qualifies

Most capital assets you inherit take a stepped-up basis:

  • Real estate, including homes, land, and rental or commercial property
  • Stocks, bonds, mutual funds, and exchange traded funds
  • An interest in a family business
  • Vehicles, art, jewelry, and other high-value personal property

What does not qualify

Three categories sit outside the rule:

  • Retirement accounts. Traditional IRAs, 401(k)s and similar tax-deferred accounts are income in respect of a decedent. IRC § 1014(c) shuts the step-up off for anything that constitutes a right to receive an item of income in respect of a decedent under § 691, so heirs pay ordinary income tax on withdrawals and the account keeps no reset basis.
  • Property gifted before death. A lifetime gift carries the giver's cost to you and receives no step-up.
  • Assets that came back within a year. If you gave appreciated property to someone, they died within the one-year period ending on the date of death, and the property passed back to you or your spouse, IRC § 1014(e) hands you the decedent's adjusted basis instead.

Rhode Island is a separate-property state

R.I. Gen. Laws § 34-3-1 puts the point plainly for real and personal estate alike: a conveyance to two or more persons, whether they be husband and wife or otherwise, creates a tenancy in common. Each owner's share sits in that owner's own estate, and only that share resets at that owner's death.

The exception matters to anyone who moved here from Arizona, California, Texas, Washington or another community property state. IRC § 1014(b)(6) lets the surviving spouse's one-half share of community property step up along with the decedent's half, but only where the property was community property under the community property laws of some state and at least half of the community interest was includible in the decedent's gross estate. Whether a particular asset kept that character after a move to Rhode Island is a question for a CPA. Ask early, while the account statements from the old state are still findable.

Rhode Island Deeds and the Reset

There is no transfer-on-death deed here

Title 34 of the General Laws holds every Rhode Island chapter on property, and its published chapter list runs from 34-1 through 34-50 without a transfer-on-death or beneficiary-deed chapter. Form sellers publish Rhode Island templates anyway. The routes that actually keep a house out of the Probate Court are a funded revocable living trust, a life estate deed, or survivorship words written into the deed itself, and each of them still steps up the deceased owner's interest. See how to avoid probate in Rhode Island for the mechanics.

A life estate deed keeps the full reset

Section 34-4-2.1 lets a grantor convey title to real estate and reserve a life estate, coupled with the reserved power to sell, convey, mortgage or otherwise dispose of the property during life without the remainder holders joining. Property a decedent kept the possession or enjoyment of for life falls into the gross estate under IRC § 2036(a)(1), and IRC § 1014(b)(9) treats property required to be included in the gross estate as acquired from the decedent. So the children who hold the remainder take the date-of-death value, not the parent's 1991 cost.

The certificate of descent, town by town

Section 33-9-29 tells the executor or administrator to record a certificate of descent in the land evidence records of every city or town in which real property of the decedent is situated, and makes it prima facie evidence of the facts stated in it. Rhode Island has no county recorder, so an estate holding property in three towns records in three separate offices. Check that the certificate matches the deed description before a buyer's title company finds the gap.

Capital Gains Tax After a Rhode Island Inheritance

Inherited property counts as long-term no matter how briefly you or the decedent held it. IRC § 1223(9) says it directly: a person whose basis in the property is determined under § 1014 and who sells within one year after the death is considered to have held the property for more than one year.

Federal long-term rates run 0 percent, 15 percent and 20 percent depending on your taxable income, and the bracket thresholds move every year, so check current figures with the IRS before you file. Two federal add-ons reach inherited real estate. A 3.8 percent net investment income tax can apply once modified adjusted gross income passes $200,000 for a single filer or $250,000 for a married couple filing jointly. And if you rent the property out after inheriting it, the depreciation you claim from that point forward comes back at sale as unrecaptured § 1250 gain, taxed at a maximum 25 percent. The decedent's own depreciation history does not follow the property, because the step-up wipes it out along with the old cost.

Rhode Island charges no separate capital gains rate. Section 44-30-12(a) defines the Rhode Island income of a resident individual as the individual's adjusted gross income for federal income tax purposes, with the modifications listed in that section, and none of those modifications touches a capital gain on inherited property. Section 44-30-2.6(c)(3) then defines Rhode Island taxable income as that federal adjusted gross income less the Rhode Island standard deduction and personal exemption, taxed on a three-bracket schedule at 3.75 percent, 4.75 percent and 5.99 percent. Subparagraph (c)(3)(E) adjusts the bracket dollars every year for inflation, so pull the current figures from the Division of Taxation rather than from an old article.

Two Rhode Island capital gains provisions still circulate and neither one reaches a sale today:

  • Section 44-30-2.7 set rates of 0.83, 1.67, 2.08 and 2.33 percent for assets held more than five years. Its own text limits it to tax years beginning in 2007 and ending prior to January 1, 2010.
  • Section 44-30-2.6(c)(2)(B)(1) capped the tax on net capital gain at 2.5, 5, 6.25 and 7 percent. It applies only where the taxpayer had a net capital gain for a tax year ending prior to January 1, 2010.

One Rhode Island mechanic can turn a single sale into a much larger bill. Section 44-30-2.6(c)(3)(A)(II) imposes a separate rate table on the taxable income of an estate or trust, and that table is far tighter than the one for individuals: it reaches the top 5.99 percent bracket a few thousand dollars in. The Division of Taxation confirms the tax reaches the Rhode Island income of every individual, estate and trust. If the estate sells the house and keeps the gain, Rhode Island takes close to the top rate almost immediately. Compare that against distributing the property to the beneficiaries first and letting them sell it in their own names.

Broker commission and closing costs reduce the gain, and you report the same gain to Rhode Island that you report federally.

The Rhode Island Estate Tax Answers a Different Question

These two taxes get mixed up constantly, and the confusion is what sends most people looking for this page.

The step-up sets the basis an heir uses to figure capital gains on a later sale. The Rhode Island estate tax is a one-time tax the estate itself may owe before assets pass to anyone. The Division of Taxation describes it as a transfer tax on the value of the decedent's estate before distribution to any beneficiary.

The Division puts the threshold for a 2026 death at a gross estate of more than $1,838,056, and defines gross estate as the full fair market value of the assets prior to any deductions. Deductions for a mortgage, debts and claims come off later, so a family whose net worth sits well under the line can still land above it on the measure that counts. That gross figure is also a different measure from your basis number, which tracks one asset rather than the whole estate.

Section 44-22-1.1(a)(4) supplies the machinery behind the annual figure. For a death on or after January 1, 2015 the tax equals the maximum credit for state death taxes allowed by 26 U.S.C. § 2011 as that section stood on January 1, 2001, against which Rhode Island allows a credit of $64,400, adjusted every January 1 by the increase in the CPI-U determined as of September 30 of the prior calendar year, compounded annually and rounded up to the nearest $5. The section never prints a year figure, which is why the Division publishes the resulting gross estate threshold instead.

Two more points sit close to a basis question:

  • Situs. Section 44-22-1.1(e) puts property inside the Rhode Island system if it is real estate or tangible personal property with actual situs in Rhode Island, or intangible personal property owned by a resident. A Connecticut resident who owned a Narragansett cottage has a Rhode Island filing on that cottage.
  • No inheritance tax. Title 44's chapter list carries chapters 44-22 and 44-23 on estate and transfer taxes and no inheritance tax chapter, and chapter 44-24, the gift tax, is repealed. A beneficiary owes Rhode Island nothing for receiving property.

To see whether the estate clears the threshold at all, run the date-of-death values through the Rhode Island estate tax calculator. For the filing thresholds, the nine-month clock and what an executor actually sends the Division, read the Rhode Island estate tax guide.

The Lien That Stalls an Inherited-House Closing

Rhode Island attaches a lien to the estate the moment the tax is due, and it is the single most common reason an inherited-house sale slips its closing date.

Section 44-23-9(a) says the tax shall be and remain a lien upon the estate until it is paid, and makes every executor, administrator and trustee personally liable until then. Section 44-23-12 puts it in the land records: whenever a statement showing ownership of real property is filed, the tax administrator notifies the recorder of deeds or the clerk of the city or town where the property is located, who notes the decedent's name and the fact that all the decedent's real property is impressed with a lien. On discharge, the tax administrator sends a further notice showing the discharge and how it happened. A title search picks up both entries.

Section 44-23-38 sets the outer limit. A lien created by chapters 44-22 and 44-23 ceases to be a lien upon, or enforceable against, real estate ten years after the death of the person whose act, failure to act, or death gave rise to it, regardless of date of death. That clears a very old title. It does nothing for a closing scheduled next month.

The release runs on forms. The Division requires Form T-77, filed in triplicate with the Rhode Island estate tax return, to discharge the lien on real property, and Form T-79, filed in duplicate, to waive the lien on Rhode Island securities and interests in Rhode Island corporate entities. Two details sink more T-77s than anything else: the description of the real estate must be the tax assessor's description as of the date of death, taken from the city or town property tax bill, and "Late of" means the city or town of the decedent's legal domicile at death. The Division states that forms not properly completed will not be processed, and that a corrective discharge may bring an amended return and a processing fee.

Start the T-77 before you sign a purchase and sale agreement. The rest of the sale mechanics sit in selling inherited property in Rhode Island.

Ways to Protect the Step-Up

  • Hold appreciated assets for life. Selling a long-held, low-cost asset before death triggers a gain the step-up would have erased for your heirs.
  • Do not deed the house to the children now. A lifetime gift passes your old cost along. Letting the property pass at death gives the full reset.
  • Use a funded revocable trust to skip the court, not to transfer during life. Trust assets step up the same way probate assets do, so the family avoids the Probate Court without losing the reset.
  • Write the values down in month one. Appraisals and brokerage statements are far easier to get in the first month than in the seventh year.
  • Put survivorship words in the deed if that is the intent. Section 34-3-1 presumes the opposite, and a couple who meant to hold jointly often finds out at the worst moment.

Records to Keep

Save these so you can support your basis if the IRS or the Division of Taxation asks:

  • The filed Form RI-706 with every schedule, plus the Notice of No Tax Due if the estate owed nothing
  • Date-of-death appraisals for real estate and high-value items
  • The § 33-9-1 inventory from the probate court file, which covers the personal property
  • Brokerage and bank statements showing date-of-death values
  • The recorded § 33-9-29 certificate of descent from each city or town where the property sits
  • Form T-77 and the discharge notice for the estate tax lien
  • Receipts for capital improvements you make after inheriting
  • The closing statement and selling-expense records from the sale

Keep them at least three years after you file the return that reports the sale. Longer is safer.

Frequently Asked Questions

Is the step-up in basis a Rhode Island rule?

No. The step-up is federal. IRC § 1014(a)(1) gives property acquired from a decedent a basis equal to its fair market value at the date of death, and it works the same way in all fifty states. Rhode Island supplies the paperwork instead. R.I. Gen. Laws § 44-23-1(a) makes every executor, administrator and heir-at-law file a sworn statement of the full and fair cash value of the estate within nine months of the death, and § 44-22-1.1(d) says all values are as finally determined for federal estate tax purposes. The state figure and the federal figure are the same figure.

Where do I find the date-of-death value of a Rhode Island house years later?

Not in the probate inventory. R.I. Gen. Laws § 33-9-1 makes the executor inventory all personal property, claims, rights and causes of action other than real property, so the house is left out by statute. The Rhode Island document that carries a date-of-death value for real estate is Form RI-706, filed with the Division of Taxation. The Division requires that return from all estates of a decedent dying on or after January 1, 2015, taxable or not. Ask the executor or the Division for a copy, and order a retrospective appraisal from a licensed Rhode Island appraiser if no schedule survives.

Does Rhode Island tax the gain on an inherited house at a special capital gains rate?

No. R.I. Gen. Laws § 44-30-12(a) defines the Rhode Island income of a resident individual as the individual's federal adjusted gross income with the modifications listed in that section, so the gain flows straight through, and § 44-30-2.6(c)(3) taxes it on the ordinary three-bracket table at 3.75 percent, 4.75 percent and 5.99 percent. Two reduced capital gains provisions still circulate online and neither reaches a sale today: § 44-30-2.7 covers only tax years beginning in 2007 and ending before January 1, 2010, and § 44-30-2.6(c)(2)(B)(1) covers only tax years ending before January 1, 2010.

Does Rhode Island charge me a tax for inheriting property?

No. Rhode Island has no inheritance tax. Title 44 of the General Laws carries chapters 44-22 and 44-23 on estate and transfer taxes and no inheritance tax chapter, and chapter 44-24, the gift tax, is repealed. The estate itself may owe Rhode Island estate tax. The Division of Taxation puts the 2026 figure at a gross estate of more than $1,838,056, measured on the full fair market value of the assets before any deductions.

Does the step-up apply if the family skips the Probate Court?

Yes. IRC § 1014(b) reaches property acquired from a decedent no matter how it passes, including through a funded revocable trust, a deed written with survivorship words, or a beneficiary designation on an account. Rhode Island offers no transfer-on-death deed, so those are the routes. Skipping the court does not skip the tax filing: R.I. Gen. Laws § 44-23-1(a) puts the nine-month statement on every heir-at-law as well as on an executor or administrator.

Does a Rhode Island deed to a married couple pass the house to the survivor?

Not on its own. R.I. Gen. Laws § 34-3-1 says a conveyance to two or more persons, whether they be husband and wife or otherwise, creates a tenancy in common and not a joint tenancy, unless the deed declares the tenancy joint, runs to those persons and the survivor of them, or otherwise shows that intent. For basis that changes little, because only the deceased owner's fractional share resets either way. For process it changes a lot, because a tenancy in common share passes through the Probate Court for the city or town where the owner lived.

Why is the closing on my inherited Rhode Island house held up?

Almost always the estate tax lien. R.I. Gen. Laws § 44-23-9(a) makes the tax a lien upon the estate until it is paid and holds executors, administrators and trustees personally liable. Under § 44-23-12 the tax administrator notifies the recorder of deeds or the clerk of the city or town where the property sits, who notes the lien in the land records, which is what a title search turns up. Form T-77, filed in triplicate with the Rhode Island estate tax return, discharges the lien on real property. Section 44-23-38 ends enforceability against real estate ten years after the death, which is no help to a sale next month.

Related Guides

Every estate carries its own numbers. Basis questions turn on facts a page cannot see, so run yours past a Rhode Island CPA or tax attorney before you file, and use the Rhode Island probate hub for the rest of the series.

Sources:

It is not legal advice.

Information current as of August 2, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Rhode Island can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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