I have the following questions on stepped-up basis and depreciation on Community rental property in California on death of spouse. Both H & W filing MFJ as California Residents.Husband died in March 2023. For 2023 MFJ tax return, how should the surviving wife report the stepped-up basis of the rental prop held in both H & W names as community property? Does she report 100% fair market value as of the date of death on the 2023 tax returns?On form 4562, how is the stepped-up basis reported and the Depreciation calculated? Is it calculated from March 2023 to Dec 2023 based on the FMV or is it calculated for the full 2023 year on FMV over the 27.5 years asset life?Where to note on form 4562 that the depreciation is now on a stepped-up basis?What will happen to the depreciation deducted in prior years when H was alive?The wife sold the rental property in May 2024. How will she recapture the depreciation in 2024 that she would have taken in 2023 on the stepped-up FMV basis?

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Question

Stepped-up basis and depreciation on Community rental property in California on death of spouse. Both H & W filing MFJ as California Residents.

Forum|Forum|1 year ago
October 10, 2024
3 replies
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I have the following questions on stepped-up basis and depreciation on Community rental property in California on death of spouse. Both H & W filing MFJ as California Residents.

Husband died in March 2023. For 2023 MFJ tax return, how should the surviving wife report the stepped-up basis of the rental prop held in both H & W names as community property? Does she report 100% fair market value as of the date of death on the 2023 tax returns?
On form 4562, how is the stepped-up basis reported and the Depreciation calculated? Is it calculated from March 2023 to Dec 2023 based on the FMV or is it calculated for the full 2023 year on FMV over the 27.5 years asset life?
Where to note on form 4562 that the depreciation is now on a stepped-up basis?
What will happen to the depreciation deducted in prior years when H was alive?
The wife sold the rental property in May 2024. How will she recapture the depreciation in 2024 that she would have taken in 2023 on the stepped-up FMV basis?

Anonymous_

Employee

No text available

Anonymous_

Employee

No text available

Wish2Author

Thank you for your prompt response.

For proper reporting on form 1040 of 2023, how is the Stepped-up basis of the rental R/E on the date of death reported on what forms to avoid questions from the IRS?

On what form do I indicate that the Rental R/E was "disposed of without a sale"?

Do I then create a new form 4562 Depr showing the Stepped-up basis and the date placed in service as of the date of husband's death?

How to split the land and building value on the new Depr form?

Anonymous_

Employee

No text available

Anonymous_

Employee

No text available

Wish2Author

Thank you for your prompt response.

The FMV on the date of death in March 2023 was high but when the rental R/E was sold in May 2024, it was sold at a much lower price than the March 2023 FMV.

After H's death, can the surviving wife carry over the big loss on the sale of rental R/E to future years? If so, for how many years?