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Rental home was bought in June 1999 for $135k. One spouse died in 2021 when the house was appraised for $515k. The home was sold on March 2022 for $520k. Just on those figures alone, what would be their basis? Thanks for any help.
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1/2 of purchase price plus improvements during time owned, plus1/2 of FMV on date of death of spouse, plus difference in that full FMV and FMV on date of sale.
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The last phrase in your response is confusing.
The stepped up basis (assuming no improvements were made at any time) should be $325,000 in this case.
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Not enough information was provided to answer the question (and yet you somehow got two answers already). The two big things that jump out as omitted:
1) Are you in a community property state?
2) What about depreciation allowed or allowable?
Rick
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As @rbynaker said when a spouse dies it makes a difference if you are in a community property state.
There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
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Her basis is 1/2 of purchase price plus 1/2 of FMV on date spouse's death. Depreciation for the rental time only is for the residence, not the land, so that is not included in basis. Depreciation is a separate calculation done once current full basis is determined.
Is that clearer?
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What's not clear is why you are ignoring the previous answers pointing out that we need to know whether this is a community-property state. Just because you are out in the middle of the Pacific doesn't mean you can ignore 40% of the country.
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Hi. It is a community property state. California. I will add or subtract any depreciation taken or improvements over the years.
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Thanks for that info.
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The original post did not ask for that to be addressed....I answered what was asked.
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Appreciated the communication. To confirm, in California, when spouse dies is the property 100% stepped up based on the FMV of date of death? Thank you.