Depreciation and stepped up basis.

Forum|Forum|3 years ago
March 28, 2023
2 replies
18 views

Client (husband and wife) own a condo jointly with single son, 50% interest each, full rental. Husband died in 2022. Do I start depreciating a new asset, 25% (husbands ownership share) of FMV at husbands date of death for the wife, or do I just leave the depreciation as is. Any help appreciated!

ProSeries Professional

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Best answer by TaxGuyBill

You would use the step up.

Assuming this is NOT in a Community Property State, I generally recommend:

Split current assets into two new assets, each with the original "placed in service" date, 50% of their prior Basis (in your case, 25% of the total Basis), and 50% of their prior "prior depreciation" (in your case, 25% of the total prior).
Delete the old asset because you just replaced it with two 50% assets.
For the 50% asset that belonged to the husband, enter the date of death as the disposition date (leave the sales price BLANK).
Create another asset (the stepped up portion for the husband), using the FMV (50% of your clients total, or 25% of the complete total) using the date of death as the "placed in service" date.

T

TaxGuyBillAnswer

Level 15

You would use the step up.

Assuming this is NOT in a Community Property State, I generally recommend:

Split current assets into two new assets, each with the original "placed in service" date, 50% of their prior Basis (in your case, 25% of the total Basis), and 50% of their prior "prior depreciation" (in your case, 25% of the total prior).
Delete the old asset because you just replaced it with two 50% assets.
For the 50% asset that belonged to the husband, enter the date of death as the disposition date (leave the sales price BLANK).
Create another asset (the stepped up portion for the husband), using the FMV (50% of your clients total, or 25% of the complete total) using the date of death as the "placed in service" date.

B

billr617Author

Level 4

Thank you! Sounds like the solution. Much appreciated!

BobKamman

Level 15

Have you seen the deed? Does it say, "H and W, as joint tenants with right of survivorship as to a 50% interest; and S as tenant in common with them as to a 50% interest," or something like that? Or does it say all three of them are joint tenants? Maybe there was a side agreement on how the income and expenses would be split. If you ask Mom what happens when she dies, does she tell you "it goes into my estate and has to be probated, my son is not a joint tenant with right of survivorship"? Or more likely, does she admit "I don't know."

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