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If husband inherits investment property from his mother 40

Customer Question

If husband inherits investment property from his mother 40 years ago while he is married, can he get stepped up basis on this property when his wife dies? Didn't really put any money into this property which is land. Value increased by $600,000. They live in Community property state and don't think wife was ever on title.
Submitted: 5 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 5 years ago.

Hello, welcome, and thank you for choosing Just Answer.

 

Yes, at the death of the first spouse, community property steps up in basis, not 1/2 of it, but all of it. Only half of the community property is included in the decedent's estate, the other half belongs to the spouse. The 100% step up is different from joint property. In California, there is also "community property with right of ownership". This helps avoid probate.

Customer: replied 5 years ago.
So this is true even if this was inherited property to the husband not the wife? I want to make sure that this is not considered separate property of the husbands even in a community property state.
Expert:  Tax.appeal.168 replied 5 years ago.

This is correct, even in a community property state. You can refer to the IRS Publication 551 for more detailed information regarding this matter.

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Expert:  Jax Tax replied 5 years ago.
The stepped up basis is.true for.community property but under federal and state code, inheritance are not.community property unless tramuted which means they are used to support the family. In this case it is an inherited piece.of.land that is.stated.not to have been used. So unless it was.used in some substantial way in regards to the support of the family, it is not community property and not.subject to any step up in basis if she was never on title. The basis would remain the same. Examples of becoming community property would be borrowing from it to support the family. Paying to repair or maintain the property with community funds or otherwise using it to support the family unit. None of these are.stated. There is no step up in basis otherwise.

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