Property received by inheritance currently receives a “stepped-up” basis to its date of death value. Therefore, if that property is subsequently sold by you, any capital gain (or loss) to be reported on your personal income tax return is calculated as the difference between the sale price and the date of death value. The appreciation in value of that capital asset which occurred during the decedent’s ownership of the asset avoids capital gains taxation.

Generally speaking, property received as a gift, bequest or inheritance is not included in your income for tax purposes. However, that property later produces income, such as interest, dividends, rental, etc., that income is taxable to you.
In addition, there may be taxable consequences relating to amounts you inherit from retirement accounts owned by the decedent, such IRA’s and annuities. Thus, if you are a beneficiary of such an account, it is prudent to consult with your tax or financial advisor to discuss your distribution options.
With such retirement accounts, any amounts …

Every estate may be subject to two types of death taxes, depending on the total value of all assets including the taxable estate and to whom the assets pass. The taxable estate is not the same as the probate estate. The taxable estate includes both probate and non-probate assets.