Step up basis for home sold by widowed spouse in CA one year following husband's death

Forum|Forum|1 year ago
March 23, 2025
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My mom and dad were married and lived in the same house in California for 48 years. My dad died in Dec 2023, and my mom sold their home in Dec 2024. I'm told she's entitled to an adjusted cost basis equal to the Fair Market Value of the home as of the date of his death ... is this correct? If not, how do I calculate the property's adjusted cost basis?

Capital Gains

JohnB5677

The law of the state, or the law of the foreign country, where you are domiciled will determine if you have community property, community income, or both.

California is a community property state

Death of spouse.

If you own community property and your spouse dies, the total fair market value (FMV) of the community property, including the part that belongs to you, generally becomes the basis of the entire property.
For this rule to apply, at least half the value of the community property interest must be includible in your spouse's gross estate, whether or not the estate must file a return (this rule doesn't apply to RDPs).

Example.

Taylor and Blake owned community property that had a basis of $80,000.
When Taylor died, their community property had an FMV of $100,000.
One-half of the FMV of their community interest was includible in Taylor's estate.
The basis of Blake's half of the property is $50,000 after Taylor died (half of the $100,000 FMV).
The basis of the other half to Taylor's heirs is also $50,000.
For more information about the basis of assets, see Pub. 551, Basis of Assets.