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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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my parents have owned a home for 40 years. my father died

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my parents have owned a home for 40 years. my father died 4 years ago. they had an A-B trust, but i never retitled the house. she now wants to sell. as the house hasn't appreciated much in the last few years, can I sell it so half is under the B trust at stepped up value and half with her 250,000 deduction? its probably worth 800,000 with a basis of about 100,000. (in California)

we are building a mother-in-law unit on my sister's property for about 250,000 with her funds as well, does that come into play?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

LEV :

Hi and welcome to Just Answer!
Because your parents are living in California - which is a community property state - the property has the stepped up basis equals to its fair market value at the time your father passed away.
So the basis is really much more than the original purchase price.
Assuming the fair market value was $600,000 when your father died 4 years ago - that is a new stepped up basis. In this case - if the property will be sold for $800,000 - the gain will be $800,000 (selling price) - $600,000 (basis) = $200,000 - and your mother may exclude up to $250,000 if the property was used as her primary residence...

LEV :

See for reference IRS publication 551 - http://www.irs.gov/publications/p551/ar02.html#en_US_2010_publink1000257012


In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return.


Let me know if you need any help.


Be sure to ask if any clarification needed.

Customer:

great, this is what I hoped, so no reason to worry about retitling into the b trust


 


thanks

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22776
Experience: Taxes, Immigration, Labor Relations
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