Stepped up basis on rental property

[Jesse]

Fact: A rental unit acquired by inheritance will receive full stepped up basis to FMV at date of death of deceased.

Question: If rental unit is sold at FMV do I need to make a basis adjustment for the depreciation taken in prior years on the building by the deceased?

Or does depreciation allowed just "disappear" and if sold at FMV as of DOD there is no gain or loss?

[solomon]

Assuming there was not joint ownership with the deceased, then I believe prior depreciation disappears.

[dsi]

Agree with Solomon

[Jesse]

Thanks, this is actually community property in the state of Wisconsin. It is indeed community property and not marital property, which is huge as the surviving spouse receives "double" stepped up basis, that is, 100% of FMV at DOD.

With the disappearance of depreciation it just seems "to good to be true".

[Burke]

Assuming there was not joint ownership with the deceased, then I believe prior depreciation disappears.

And if there were joint ownership, (i.e, father and son), then only the deceased father's ownership percentage gets stepped up, correct? I did not do deceased father's returns, but a review of his old returns reveals he was claiming all income, expenses and depreciation on the property. Son did not contribute anything to basis. Just his name on the deed.