Inherited Property

[Jiggers]

Taxpayer died on 6/30/2006 and had a farm.

Left everything to spouse in community property state so she receives full step-up in basis.

She will operate the farm, and will depreciate the assets that received the step-up in basis.

What method does she use?

Standard MACRS, 150% DB (for farmers)? Or does she have to use ADS straight line?

Does she start depreciation on 6/30/2006 or does she have to calculate deprecation for a short-year?

[fliszt]

Did taxpayer

depreciate farm & equipment prior to deceased? Did spouse sign tax return with TP while (if) depreciation was taken?

[Jiggers]

Inherited Property

depreciate farm & equipment prior to deceased? Did spouse sign tax return with TP while (if) depreciation was taken?

Yes to both.

[jainen]

a widespread misunderstanding

>>Left everything to spouse in community property state so she receives full step-up in basis.<<

There is a widespread misunderstanding about this point. The wife would receive a basis adjustment for the decedent's separate property, for his share of joint tenancy, for his community property, and for her own community property. However, her share of property held in joint tenancy is NOT necessarily community property, and might not get the new basis.

No doubt this truth will become more palatable as property values drop.

[JG EA]

Depreciation

Also note the thread about how depreciation works in a case like this.
This was an area I knew nothing about - such an important asset we have in this board. (Should we start depreciating it?)

http://www.thetaxbook.com/forums/showthread.php?postid=7731#poststop