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 MemberTotalOriginal Cost90,00090,000180,000Value when inherited112,500112,500225,000Home Basis For Sale Cost90,00090,000180,000Stepped up basis 22,50022,500Basis after inheritance90,000112,500202,500

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Stepped up basis rules for inherited property

Forum|Forum|5 years ago
September 30, 2020
3 replies
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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?

	Client	Family Member	Total
Original Cost	90,000	90,000	180,000
Value when inherited	112,500	112,500	225,000
Home Basis For Sale
Cost	90,000	90,000	180,000
Stepped up basis		22,500	22,500
Basis after inheritance	90,000	112,500	202,500

Lacerte Tax

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Best answer by PhoebeRoberts

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.

sjrcpa

Level 15

Yes

The more I know the more I don’t know.

PhoebeRoberts

Answer

Intuit Community Champion

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.

Accountant-Man

Level 13

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

Intuit Community Champion

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 15

"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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