A California married couple has 140K of capital loss carryover on the sale of mutual funds held as community property. The wife died in 2010. 3K of the carryover will be used up on the 2010 return. How much carryforward will the husband have to future years: 137K, 68.5K, 0? (I have seen all three answers given!) Chapter and verse would be appreciated.
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Evan Appelman, EA -
See PLR 8510053, Revenue Ruling 74-175, and Regulation 1.1212-1(c)
If the funds were always held as community property, then the carryover for the surviving spouse is $68,500.Last edited by BHoffman; 09-15-2010, 04:45 PM. -
Thank you BHoffman
Thank you BHoffman. For 2010, I believe the lost carryover of the decedent can be used to increase the basis of his remaining assets, but presumably not above their FMV at date of death. Does this sound right?Evan Appelman, EAComment
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Evan - I don't know the answer to that, but I'll give you a bump.Comment
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Appelman, I believe you are correct. See https://www.cpa2biz.com/Content/medi...fEstateTax.jsp. It says "...the basis of a decedent's property can be increased by the amount of unused capital losses, net operating losses (NOL) and certain built-in losses, but...the value of any interest in property received cannot be stepped up in excess of its fair market value."Comment
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IMO, I believe you have received three different answers because in some cases each of the three would be correct. The key is how the asset is/was owned and titled.
1. Solely owned by one spouse, NOT a community property state. "0" carryover. This would include TOD and POD accounts, which are titled thusly just to facilitate transfer outside of probate.
2. Owned by both spouses, joint tenants. $68.5 carryover.
3. Owned by both spouses, joint tenants with right of survivorship (JTROS), $137K carryover.Comment
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