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old property, dead people, and basis.........


schirallicpa
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Married couple.  Wife inherits land in 1987.  We're in NY.  Land is recorded in both H & W names.  Wife died in 2014.  Now the man is selling (to Dollar General, BTW).   

So I'm scrapping thru old tax files trying to see what land may have sold for in 1987 in order to figure basis.  So then does he get her half stepped up to 2014 values?  while he keeps his half at 1987 value?  He can't possibly get all of it stepped up.  But I think he gets her half.  However - since it was HER inheritance, does it get all stepped up?  (Round and round in circles I go.)  After all, it was hers......

I've done tax work for 22+ years and I guess I had never come across this specific situation, and it's making my brain hurt today.🤔

 

 

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In 87 when wife inherited the property, wife essentially gave husband a gift of half of the property's value at that time, so his basis is the value at the time of wife's inheritance. 

 Then when wife dies in 2014, husband gets a step up of the other half of the property that was titled in the wife's name that passed to him.

Summary:  For husband's purpose of this sale, half of the property is at the 1987 inherited value, and the other half is at the 2014 value.

 

 

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Just to start the conversation....

At time of inheritance in 1987 wife gets full stepped up basis to FMV from decedent.  

At some point, W gifted half to H (per the recording document), and the basis in his hands is the same as it was in hers.  So you need to find the 1987 FMV for your starting point basis.  

In 2014, because NY is not a community property state, I assume he inherited her half.  He gets 50% of 2014 FMV basis for her half.

Assuming there were no improvements or other changes to basis in the intervening years, the calculation is 50% of the 1987 FMV and 50% of the 2014 FMV.

Tom
Longview, TX

 

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1 minute ago, jklcpa said:

In 87 when wife inherited the property, wife essentially gave husband a gift of half of the property's value at that time, so his basis is the value at the time of wife's inheritance. 

 Then when wife dies in 2014, husband gets a step up of the other half of the property that was titled in the wife's name that passed to him.

Summary:  For husband's purpose of this sale, half of the property is at the 1987 inherited value, and the other half is at the 2014 value.

 

 

You beat me to the post.   You must type fast.....

Tom
Longview, TX

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Is it just me, or are a lot of people selling old properties this year?  Inherited, gifted, purchased; I have already had several inquiries on what the CG tax is going to be.  We just figured one out yesterday based on 2021 return so that he could send in an estimate payment.  Talk about making your head hurt!  And then there are the LE estate properties being sold before the death of the Remainder owner!!!!

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Will happen more often in CA, estate sales, because of our Prop 19... Sold my grandparents home recently.  Bought in '69.  Had a $70 lien on it for treatment at a county hospital in '71.  No interest was charged!

Had there not been a requirement for one of the heirs to reside there, we would have likely kept it. It was one of the last in it's development still a residence.  The property was split by Hwy99 decades ago, and on both sides of the freeway, it became commercial usage.  The new owners have done what the neighbors did, gut, then remodel for a construction office (electricians in this case).

I suspect, now that CA has such a rule in place, those who benefit will try to repeat in other states.

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I have a couple in my small practice that are selling properties in various ways. Spouse's dad has a partnership that sold a building, so my client's K-1 will reflect that. That kind of thing. And, they all need ES calculated. I'm still preparing 2021 returns and don't have enough hours in the day to recalculate 3Q and 4Q 2022 ES, especially when their % of ownership in that partnership that sold the building changed as dad gives more to his grown kids each year. Even more time-consuming if they became my clients without basis info for dad's 1065 and 1120S K-1s, and I'm waiting on all their prior returns/K-1s to compute basis, too!

I am seriously going to fire some clients in October.

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