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inherited house basis

Taxfun
Level 3

Father died 10 years ago. Mother did a quit claim and passed the house to their son. in 2020, son rent out the house. what is the basis for the depreciation, the parents' adjusted basis at the time of the transfer (quit claim) or the step-up basis on the date of father died? I think that it should be the parents' adjusted basis at the time of the transfer (quit claim). Any thoughts? Thanks!

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3 Replies 3
BobKamman
Level 14

It is definitely not the adjusted basis at time of transfer. Was the father the sole owner, or did the mother own half?  You would use FMV at date of death for the father's interest -- what you do with the mother's share, depends on whether she had an ownership interest then, and whether they resided in a community-property state.  

Taxfun
Level 3

thanks for the reply. good point. I did not thought about that. 

No they did not reside in a community-property state. so if

1) if the father the sole owner, the basis should be FMV at date the death.

2)if they jointly owned the house, the father's portion should be FMV of the death. mother's portion should be the adjusted basis of mother's adjusted basis

Is it right?

BobKamman
Level 14

I think that's right but all my clients live in community-property states, so I don't have to deal with unfortunates who don't.