Business assets in community property state

[Jesse]

Community Property State:

Schedule C has always been filed in Husbands name as Sole Proprietor.

Wife passed away last week.

No marital property agreement.

Would husband receive 50% stepped up basis on business assets?

[Maribeth]

Upon the death of a spouse, assets held by a marital community in Washington State are stepped up or down to 100% of fair market value. Depreciation starts anew.

Maribeth

[tilt53]

If the business has always been the husband's why would there be any stepped up basis? I can understand if they jointly operated the business (CA allows this for a husband and wife).

[WhiteOleander]

Yes, in TX the assets in the business would receive 100% stepped up basis. This is because the assets have to be accounted for at FMV at the date of death in determining if there is a federal inheritance tax due. But, any accounts receiveable or notes due, etc do not get a step up.

If there is rental real estate, it too would receive the step up and depreciation would begin again.

HTH

[Jesse]

If the business has always been the husband's why would there be any stepped up basis? I can understand if they jointly operated the business (CA allows this for a husband and wife).

The business was in his name and vans titled in the business name all purchased after Wisconsin became a marital property state, therefore, 50% ownership would have belonged to the wife. If the business was joint they would be entitled to 100% step up.

This is Wisconsin, no real estate, only tools, business equipment, and a couple cargo vans. So, again, I think because they do not have a marital property agreement only 1/2 of the assets are considered hers, therefore 50% step up.

I'm thinking out loud and going in circles, I have found many examples with rental property, and I can't find any "exceptions" for business property that would lead to a different conclusion.

[Maribeth]

"The business was in his name and vans titled in the business name all purchased after Wisconsin became a marital property state"

If the property was all purchased AFTER Wisconsin became a community property state, then the property is considered community property. It is not her property nor is it his property, it is their property. Purchased by the marital community.

In my state, she gets a 100% step-up in basis. Look to see if Wisconsin has an exception, but if not, I believe she will get the full step-up.

Maribeth