Widow's Sale of Residence

[RayT]

Married couple purchased home 10 years previous. Husband died in 2004. Community property state: Washington. As I understand, the spouse receives the home at the same basis as the couple had previous to husband's death. Surviving spouse is selling the home in 2007. What is the gain exemption applicable to the surviving spouse? $500k or $250k?

[sea-tax]

Married couple purchased home 10 years previous. Husband died in 2004. Community property state: Washington. As I understand, the spouse receives the home at the same basis as the couple had previous to husband's death. Surviving spouse is selling the home in 2007. What is the gain exemption applicable to the surviving spouse? $500k or $250k?

I believe the Wife's basis is what ever the FMV of the home was on the husbands date of death plus any improvements. If she is currently filing as a single person then her section 121 exclusion will be 250k. Hope I got that all right.

[S T]

Title to Property

If held in community property title rather than joint tenancy, the surviving spouse should receive the step up basis of fair market value, I believe.

As far as exclusion of Section 121, if sold in the year that the surviving spouse files as single taxpayer , then only $250,000 exclusion.

Hope this helps answer your question.

Sandy

[Corduroy Frog]

Inflation

I remember when the law change from "deferral of gain" on the sale of a residence (the old Form 2119) to outright "exemption" up to a half million. And interest allowability on principle up to basis or $1,000,000.

At the time I thought this would solve everyone's problem except the "filthy rich." But this social scheme rings of the 1993 tax increase on the filthy rich and we found out just who the government thinks are "filthy rich." Most Americans got a tax increase.

My cousin visited me from California this summer. I live in what I consider to be a comfortable, middle-class home. He told me what it would be worth where he lives. I would be up against the wall to report less than the exempted amount. Last year I saw a client enter into a mortgage over $1,000,000 for the first time. I have several clients worth considerably more, but this was the first to OWE this much.

Are there any inflation allowances being contemplated? If most of you are like me, you won't know. But a few of us occasionally have "inside scoop" on legislation. If you do, please holler.

[New York Enrolled Agent]

Both NAEA and AICPA have written to Congress suggesting two items:

#1 - A surviving spouse be given one full year after the date of death of the spouse to sell a principal residence and be allowed the full 500K exclusion. (Obviously, as an example, the death of a spouse on January 2 compared to the death on December 22 in any given year does not create a level playing field for purposes of §121).

#2 - The 250/500K amounts be adjusted for inflation.

No action yet as far as I know.

[joanmcq]

Those of us that live in expensive states know about the inequalities in the tax code, where limitations are based on wages. There was an article in the paper yesterday about Silicon valley millionaires who kept working their butts off because it 'wasn't enough'. Some of it was due to living around gazillionaires and comparing your life to theirs. But one quote 'If I lived in Kansas City I'd be filthy rich, but here I'm just a working stiff" kinda sums it up.

Even here in Sacramento, where the housing market just took a spectacular dump, $250000 is a low priced home. (2bd, 1 ba) You might find a condo for under $200000.