Stepped-up basis is a federal tax rule that resets an inherited asset's cost basis to its fair market value on the date the previous owner died, rather than what that owner originally paid for it. Selling shortly after inheriting means the sale price and the basis are close together, so the taxable gain is small. This is a federal rule and does not vary by state.
Why it matters
Stepped-up basis is usually why selling an inherited house soon after a death creates little or no taxable gain.
General information, not legal or tax advice.