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  1. #1
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    Default Step Up Basis on Husbands Ownership of Home After Death

    A married couple purchase a home together back in the 60's for $30,000. In 2018 the husband passes away and the homes value is about $1,000,000 on the date of his death. If the wife sells the home, does she receive a step up in basis for his half ownership in the house? Thanks!

  2. #2
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    Quote Quoting PHD_4_U_N_Me
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    A married couple purchase a home together back in the 60's for $30,000. In 2018 the husband passes away and the homes value is about $1,000,000 on the date of his death. If the wife sells the home, does she receive a step up in basis for his half ownership in the house? Thanks!
    Read pages 9 and 10 of the following IRS Publication:

    https://www.irs.gov/pub/irs-pdf/p551.pdf

  3. #3
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    And the answer to the question is YES. Also, if she resides in it up until she sells it (with no rental use) she can exclude $250,000 of her gain. Also, I'm almost sure they must have done something over all that time to increase the basis (capital improvements of some sort).

  4. #4
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    Quote Quoting PHD_4_U_N_Me
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    A married couple purchase a home together back in the 60's for $30,000. In 2018 the husband passes away and the homes value is about $1,000,000 on the date of his death. If the wife sells the home, does she receive a step up in basis for his half ownership in the house? Thanks!
    In what state is the home located and how exactly was the home titled? That actually matters as to how the step up in basis will work in her situation.

  5. #5
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    The husband passed away in June of 2018. Doesn't she have two years to sell the home and still receive his half of the exclusion for a total of $500,000? I read this in the following IRS publication (bottom of page 4) however, I am uncertain if the new tax law changed this provision. This is also assuming the requirements outlined in the provision are met.

    https://www.irs.gov/pub/irs-prior/p523--2017.pdf

  6. #6
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    Quote Quoting PHD_4_U_N_Me
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    The husband passed away in June of 2018. Doesn't she have two years to sell the home and still receive his half of the exclusion for a total of $500,000? I read this in the following IRS publication (bottom of page 4) however, I am uncertain if the new tax law changed this provision. This is also assuming the requirements outlined in the provision are met.

    https://www.irs.gov/pub/irs-prior/p523--2017.pdf
    Yes, she does have two years and as far as I know, the new tax laws didn't change that. There has not been a new Pub 523 published. But again, the state where all of this takes place does matter, because the rules are different for community property states.

  7. #7
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    Its located in NJ, and I believe the home was titled in both of their names.

  8. #8
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    Default Re: Step Up Basis on Husbands Ownership of Home After Death

    Quote Quoting PHD_4_U_N_Me
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    Its located in NJ, and I believe the home was titled in both of their names.
    Ok, then in that case the house almost certainly was held as tenants by the entirety (TBE) and, of course, NJ is not a community property state. Since they bought the home together and neither spouse acquired his/her interest from the other by gift, devise, or inheritance then under Internal Revenue Code (IRC) 2040 one half of the fair market value (FMV) of the home is included in the husband's gross estate for federal estate tax purposes and as a result his half of the house that she inherits gets a step up in basis to FMV under IRC 2014. In short, half the home does get a bump up in basis to FMV, and she still has her previous adjusted basis in her half.

    And the two year rule under IRC 121(b)(4) for being able to increase the capital gain exclusion to include exclusion of the deceased spouse has not been changed, it is still as publication 523 described it.

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