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Couple lives in California and owned rental real estate in Hawaii. One spouse just died and the other wants to sell the Hawaii property. For the feds I will step up 100% to the property to current value. But how about for Hawaii since it is not a community property state? And is my plan for the feds correct as they live in a community property state?
And how do I handle the depreciation already taken?
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The depreciation restarts at date of death. If the spouse died in July 2019, then create a new asset (with land allocation) for the new step up in basis and start depreciation at date of death. This is applicable to US, CA and HA. They were residents of California, so all their assets get the step up, regardless of which state the assets were in.
Here's wishing you many Happy Returns
