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Stepped up basis rules for inherited property

peauff
Level 3

I have a client who co-owned property with a family member (50/50), and received full title after that family member's death.  To compute the stepped up basis of the property for it's subsequent sale, I have adjusted only the inherited 50% basis per below.  Does this make sense?

 ClientFamily MemberTotal
Original Cost90,00090,000180,000
Value when inherited112,500112,500225,000
Home Basis For Sale   
Cost90,00090,000180,000
Stepped up basis 22,50022,500
Basis after inheritance90,000112,500202,500
    
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PhoebeRoberts
Level 9
Level 9

I agree with the logic of your calculation. If there was any prior depreciation taken, I'd keep the two halves as separate assets, but that's a matter of personal preference. If the decedent had any passive activity losses suspended with respect to the property, there are sometimes some weird adjustments to basis, too.

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sjrcpa
Level 15

Yes


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PhoebeRoberts
Level 9
Level 9

I agree with the logic of your calculation. If there was any prior depreciation taken, I'd keep the two halves as separate assets, but that's a matter of personal preference. If the decedent had any passive activity losses suspended with respect to the property, there are sometimes some weird adjustments to basis, too.

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Accountant-Man
Level 11

Except that I believe in CA(and maybe other community property states) the inheritor gets a step up for 100%. Although that might only apply for married couples.

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PhoebeRoberts
Level 9
Level 9

You only get community property treatment if the property is held as community property. I don't think there are any states which permit non-spouses to hold property as a community.

BobKamman
Level 14

"Family member" could include spouse, but probably doesn't here.  

If there was no depreciation, maybe it was just raw land.  If it was a second home, how much of the selling expenses would you allow?  

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