inherited rental property

[Gene V]

When a wife inherit jointly own rental property from decease husband; since half of the property is increase to FMV, does she start depreciation the increase half from the date of death or continue using the depreciation life of the other half. (This is not a community property state)

Thanks

[Davc]

The former.

[Kram BergGold]

Plus and Minus

You stop depreciating 50% of the current items and start depreciating 50% of date of death FMV.

[Gene V]

Thanks to you both, that's what I was thinking--been a long time since I had this situation.

[DMICPA]

Basis of Inherited property

I believe you are assuming that the husband and wife each owned the property 50/50.

Since this is not a Community property state only the deceased person's basis gets the step up (or down).

However, I have found that, depending on various factors, one or the other had the money to buy the property and it is not an even split. The wife could have inherited money and bought the property with her funds and the husband may not in fact own an interest in the property irrespective of title. Or, the husband could have been the source of the funds and therefore a larger basis adjustment would result.

[Gene V]

Good point DMICPA,will take that in consideration.

[Gary2]

I believe you are assuming that the husband and wife each owned the property 50/50.

Since this is not a Community property state only the deceased person's basis gets the step up (or down).

However, I have found that, depending on various factors, one or the other had the money to buy the property and it is not an even split. The wife could have inherited money and bought the property with her funds and the husband may not in fact own an interest in the property irrespective of title. Or, the husband could have been the source of the funds and therefore a larger basis adjustment would result.

Wouldn't the property normally be a qualified joint interest under section 2040(b)(2), which is split 50/50 regardless? Look at Form 706 Schedule E, part 1.

[appelman]

Might it not depend...

on how the property was titled?

[Gary2]

on how the property was titled?

Possibly, but it doesn't seem likely given the original post.

If there were three or more owners, and it was titled as joint tenants with right of survivorship, then the amount included in the decedent's estate would indeed be based on his share of the consideration. If it were titled as tenants in common, then the respective shares would be specified in the deed (regardless of the respective bases), and I'd expect it would have to go through probate first.

I suppose there may be some states with a form of title that doesn't exactly match any of the three common forms identified in the Form 706 instructions.

Technically, the correct way to determine the stepped up basis would be to work off the 706 - except that most people aren't required to file a 706, though there might be one for the state. I've never prepared one outside of class exercises, and I'm guessing that few contributors here have - they're usually done through attorneys' offices or accounting firms with estate tax expertise. I only have it somewhat fresh in my mind because of EA studying. So my remarks are based entirely on the 706 instructions (2009/2011 versions; I haven't bothered to look at the 2010 Trivial Pursuit edition).