Step up basis in a community property state. A wife's husband died in 1998 and want to use her step up basis for the sale of the property in 2017. She has a letter and market analysis from a realtor with the value of the property as of date of death 300K, she has been renting the property for the past 8 years, and depreciating the property at the old basis of 60K, I am wondering would I need to amend the prior 2 years returns to show the step up basis considering I can only amend 2-3 years. then figure the new basis for the sale at 300k+improvements and adding back the depreciation, or maybe I should close out the rental property and start a new rental Schedule E form with the new basis. Also, is the market analysis sufficient for back up for the step up basis. or should I include a note showing the step up basis with the return. I am trying to avoid any audit issues. Should the client just hold on to the evidence in case of an audit, and not required to include any documents.
Thanks
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