Menu

Stepped Up Basis Real Estate

Home Estate Planning Stepped Up Basis Real Estate

  • Avatar PhotonsRGR8 
    Participant
    Status: Physician
    Posts: 105
    Joined: 07/24/2017

    My father recently died. His accountant told me to get an appraisal of my parents real estate in FL so when my mother is gone, we inherit at stepped up basis. Wouldn’t appraisal make sense when mother is gone? 2 properties were bought for 240K, now worth approx 3M. Both on water.

    #227081 Reply
    Avatar DavidGlennCPA 
    Participant
    Status: Accountant
    Posts: 57
    Joined: 06/12/2019

    Your mother gets a step up in basis on your father’s 1/2 of the jointly owned properties.  If she sells the properties before she passes or turns either into a rental the basis will be relevant and an appraisal would be worth it.

    If she holds the properties until she passes and does not rent them out then the value at your father’s passing is not relevant.

     

    David Glenn, CPA | Glenn Advisory
    https://www.taxcpafordoctors.com | (808) 321-5664

    #227095 Reply
    Avatar Dont_know_mind 
    Participant
    Status: Physician
    Posts: 944
    Joined: 11/21/2017

    Sorry to hear about your father passing.

    Check the ownership structure of the property and the terms of the will.

    Depending on the cost of appraisal, I generally get one for highly valued property when there is change in ownership or structure and any risk of CGT/other duties. Even though theoretically, there should be no CGT, that is my greatest fear (a CGT event being inadvertantly triggered or transfer duties having to be paid once or even twice).

    It doesn’t actually address that risk, but in the process of figuring out if there is CGT activation risk (or where), I obtain an appraisal sometimes. This could be relevant if there is a substantial amount in potential capital gains and where the transfer duties can be onerous.

    Probably the main thing is to identify CGT/transactional event risk and ensure that it is transferred so that your mother and you get step-up basis. You may need to speak with the accountant and a transactional or tax lawyer. Potentially with any property transfer of title, you can trigger CGT and transfer duties, so you want to make sure you are careful in thinking through the tax risks and minimizing them. It is uncommon for major stuff ups to occur with simple structures (individual holdings) but I’m sure it is possible, particularly if the will is complex.

    I have a property that appreciated from 1M to 7M, so whenever I do anything with it that may trigger CGT, I get very nervous. Generally, I check with my accountant and a property tax lawyer if there is any risk.

    #227133 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016

    Are you sure you’re not leaving out part of the CPA’s advice? You should definitely consider an appraisal now for the 1/2 of the property that your mother inherited. This will verify the higher basis should she sell or gift before death. Then an appraisal at 2nd death if property is still held.

    Sincere condolences on the loss of your father and may you have many good memories to comfort you and your family.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #227165 Reply
    Avatar PhotonsRGR8 
    Participant
    Status: Physician
    Posts: 105
    Joined: 07/24/2017

    Thank you for your replies. Information greatly appreciated. My mother has many years of expenses covered in their joint brokerage appropriately invested (thanks Dad) so she’s in no hurry to sell. She’s in an ideal location. If she becomes incapacitated, I am planning on moving her in with me or hiring full time staff there. It’s her call. Very fortunate my brother lives close to her.

    If she holds the properties until she passes and does not rent them out then the value at your father’s passing is not relevant. @ DavidGlennCPA. Thank you for confirmation. Is this because her individual estate exemption is 11,180,000?

    #227199 Reply
    q-school q-school 
    Participant
    Status: Physician
    Posts: 2629
    Joined: 05/07/2017

    condolences on your loss.

     

    #227208 Reply
    Liked by PhotonsRGR8
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016
    and does not rent them out

    Click to expand…

    fwiw, business use is irrelevant. Upon sale, any deprn taken would simply reduce the new basis (negligible).

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #227251 Reply

Reply To: Stepped Up Basis Real Estate

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear