PhotonsRGR8ParticipantStatus: PhysicianPosts: 105Joined: 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.July 1, 2019 at 7:40 pm MST #227081DavidGlennCPAParticipantStatus: AccountantPosts: 57Joined: 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) 321-5664Dont_know_mindParticipantStatus: PhysicianPosts: 944Joined: 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.jfoxcpacfpModeratorStatus: Financial Advisor, Accountant, Small Business OwnerPosts: 8113Joined: 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.PhotonsRGR8ParticipantStatus: PhysicianPosts: 105Joined: 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?July 2, 2019 at 10:29 am MST #227199q-schoolParticipantStatus: PhysicianPosts: 2629Joined: 05/07/2017
condolences on your loss.jfoxcpacfpModeratorStatus: Financial Advisor, Accountant, Small Business OwnerPosts: 8113Joined: 01/09/2016and does not rent them outClick to expand…
fwiw, business use is irrelevant. Upon sale, any deprn taken would simply reduce the new basis (negligible).July 2, 2019 at 1:47 pm MST #227251