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Lev, Tax Advisor
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When I was divorced, rental property that I received was given

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When I was divorced, rental property that I received was given a specific value which was higher than when we purchased it. I was told that the new value can be used as the basis when this property is sold.....is this the case?
Submitted: 1 year ago.
Category: Tax
Expert:  PaulmoJD replied 1 year ago.
Thank you for your question. I look forward to working with you for educational purposes only.

When the property was transferred to you as an award in the divorce, you receive the value of that property at the time it was transferred solely to your ownership. This means that your tax basis for capital gains purposes is based on the value at the time it was transferred to you and you get the stepped up basis.




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This is NOT the practice of law nor is it legal advice to you, it is merely educational information for you to use to seek out a licensed attorney in your state to get actual legal advice from them. Please use sites such as http://www.martindale.com or http://www.lexmundi.com or http://www.hg.org to find a local attorney to get actual legal advice in all matters.
Expert:  Lev replied 1 year ago.
Hi and welcome to our site!
The stepped up basis equal to the value of the property at the time of transfer is ONLY available when the property is transferred because of the death of the original owner.

Thus - the information you were given that the fair market value of the should be used as the basis to calculate the gain when the property is transferred as property settlement in the divorce - is not correct.
Sorry if you expected differently.

According to the IRS - generally, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce.
Similarly - the property basis for depreciation and for capital gain calculations would not change.

See for reference IRS publication 504 - www.irs.gov/pub/irs-pdf/p504.pdf‎
page 20 - right column - Basis of property received. Your basis in property received from your spouse (or former spouse, if incident to your divorce) is the same as your spouse's adjusted basis. This applies for determining either gain or loss when you later dispose of the property. It applies whether the property's adjusted basis is less than, equal to, or greater than either its value at the time of the transfer or any consideration you paid. It also applies even if the property's liabilities are more than its adjusted basis.
Customer: replied 1 year ago.
This is to PaulmoJd
Since I received an opposing answer to yours; would you mind telling me what information you based your answer on?
I would love to accept your answer, because it is what I would like to hear, but I would be interested in more information from you.
Thanks, Connie
Expert:  Lev replied 1 year ago.
Hi Connie,
PaulmoJd would not be able to address your question because it was moved to the tax category.
You may contact him directly by posting a new question in the Legal category.

Unfortunately that statement was not correct.
There is NO stepped up basis for any transfers other than when assets are inherited.
Sorry if that doesn't favor your situation.

See for reference IRS publication 504 - www.irs.gov/pub/irs-pdf/p504.pdf‎
page 20 - right column - Basis of property received.

Specifically for determination the basis - see IRS publication 551 - www.irs.gov/pub/irs-pdf/p551.pdf‎
Sorry that you expected differently.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23166
Experience: Taxes, Immigration, Labor Relations
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