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Employee
May 31, 2019
Solved

Death of spouse step up basis on CA rental prop..

  • May 31, 2019
  • 1 reply
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I need specific TT entries on how to remove old property  and enter new value of property (building  minus land); also do I remove related assets such as carpets, appliances, etc. already being depreciated, as I think they might included in new appraisal.  Do I start a whole new rental property, or do I work on the old?
    Best answer by view2

    In California as a community property state, the surviving spouse can usually claim a new stepped-up basis on the home's entire market value,

    At the rental summary screen click the asset  update radio button to the right then edit on the asset summary screen and proceed to 'Tell us about this rental asset". check the block  "This item was sold .retired , etc " [Enter the date of death of decedent./or alternate date if applicable]  proceed on out..... NO OTHER ENTRY.

    Stops depreciation..

    According to Internal Revenue Code Section 1014, the tax basis of inherited property is generally the fair market value on the date of death, or the alternate valuation date if that value was used on the decedent's estate tax return.

    In Revenue Ruling 63-223, the IRS stated that depreciation determined for the period after a decedent's death shall be computed using the fair market value as of the date of death or the fair market value on the alternate valuation date, as applicable.[land value is separated.. land is not depreciated]

     The accumulated depreciation on the rental property prior to the decedent's death is irrelevant. Once the property has been inherited, the depreciation schedule would begin based on the new fair market value.

    You then start from the beginning and add a new rental property with a new basis on date placed in service as applicable.

     

    1 reply

    view2Answer
    Employee
    May 31, 2019

    In California as a community property state, the surviving spouse can usually claim a new stepped-up basis on the home's entire market value,

    At the rental summary screen click the asset  update radio button to the right then edit on the asset summary screen and proceed to 'Tell us about this rental asset". check the block  "This item was sold .retired , etc " [Enter the date of death of decedent./or alternate date if applicable]  proceed on out..... NO OTHER ENTRY.

    Stops depreciation..

    According to Internal Revenue Code Section 1014, the tax basis of inherited property is generally the fair market value on the date of death, or the alternate valuation date if that value was used on the decedent's estate tax return.

    In Revenue Ruling 63-223, the IRS stated that depreciation determined for the period after a decedent's death shall be computed using the fair market value as of the date of death or the fair market value on the alternate valuation date, as applicable.[land value is separated.. land is not depreciated]

     The accumulated depreciation on the rental property prior to the decedent's death is irrelevant. Once the property has been inherited, the depreciation schedule would begin based on the new fair market value.

    You then start from the beginning and add a new rental property with a new basis on date placed in service as applicable.

     

    Employee
    May 31, 2019
    Thank you, this clarified the structure entries, but what about the related 5 yr. assets-refrig., carpets. etc.?