Inherited Basis

[KWF]

A beneficiary inherits a piece of real estate from a decedent.

The real estate has an unpaid mortgage amount. The benefiicary pays off the mortgage.

Does the amount of the mortgage paid by the beneficiary affect the beneficiary's inherited basis in the property, which would otherwise be the fmv on decedent's date of death?

[BOB W]

A beneficiary inherits a piece of real estate from a decedent.

The real estate has an unpaid mortgage amount. The benefiicary pays off the mortgage.

Does the amount of the mortgage paid by the beneficiary affect the beneficiary's inherited basis in the property, which would otherwise be the fmv on decedent's date of death?

It seems like the FMV of the house is reduced by any assumed liability to get to inherited basis. Paying off the liability just brings the house up to FMV. If you were being taxed on the inheritence I'm sure you would reduce FMV by the liability assumed.

I could be wrong, but it seems logical to me.

[Kram BergGold]

No

Mortgage has nothing to do with basis. Basis is FMV on date of death or alternate date if elected on an Estate return.

[BOB W]

Mortgage has nothing to do with basis. Basis is FMV on date of death or alternate date if elected on an Estate return.

OK. So to answer the posters question, does paying off the inherited mortgage increase his basis? Taxpayer invested additional monies in order to take posession of the home.

[erchess]

Moot Point?

Isn't it a moot point? Let's say for discussion that the house had FMV of 200K and was subject to a Mortgage of 100K.

Now if he sells the house at that point I can see where Kram and Bob who both know more about real estate sales and inheritances than I do have a difference of opinion that I'd like to see hashed out.

But instead the taxpayer paid off the Mortgage so it looks like to me that both Kram and Bob would agree that his basis is now $200K whether he uses it as a personal residence, uses it as a business location, rents it out, sells it or loses it in a casualty. It could be 200K because the mortgage is irrelevant and that was its FMV on the relevant date (Kram) or maybe on the relevant date it had a basis of 100K and then the taxpayer invested another 100K in it giving him an Adjusted Basis of 200K (Bob). Or am I missing something? Does anyone dare suggest that after paying off the mortgage his basis is $300K?