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Stepped-Up Basis Rules

What is stepped-up basis?

When a person dies and leaves a house or real estate to someone else, then the value of the house when it was bought is stepped up to the current market value for tax purposes. When this happens it is considered to be a stepped-up basis. When the property is received by the beneficiary, the value is worth more at the time of inheritance than when the property was originally purchased. Read below where the Experts have answered questions relating to a stepped-up basis.

Will the price of a home that an individual leaves their spouse be worth the amount at the time of death or the amount that the couple paid for it and would it be different if the surviving spouse disclaimed some of the inheritance?

The stepped-up basis is the value of the house when the spouse dies and not when the home was first bought. Even if the surviving spouse was to disclaim some of the value, the basis for gain/loss is established at the date of death.

Does the residence in an irrevocable trust get stepped-up basis from a revocable trust owner’s date of death?

In most cases, the basis of the value of the house is stepped-up to the fair market value at the time of sale not the time of death. The trust would only have to recognize the gain in the extent of the appreciation from the date the trust holder died to the date that the beneficiaries sold the property due to the stepped-up basis.

Can a child sell the parent’s house before the parent dies and can they use the stepped-up basis even if the parent is not deceased?

The child would need to gain the consent of the parent and any other individuals that have interest in the home to be able to sell the home. The parent would only hold a life estate in the property and the property would not come out of the estate but would be subject to transfer since the parent is still alive. Since the parent is still alive, there would be no stepped-up basis for the selling of the property.

In the state of Pennsylvania, if the only asset of an estate is a personal residence that was sold, is the basis the original purchase price or can the person use the stepped-up basis as in the federal law?

In the state of Pennsylvania, there is not a stepped-up basis for a property acquired by a surviving spouse or other joint tenants with right of survivorship. Pennsylvania does allow a stepped-up basis if the property is acquired through an inheritance or instate succession inheritance and would be considered the fair market value at the date of death.

When a person dies and leaves someone a piece of property and the property is sold, it would be sold at the fair market value at the time the person died. This is considered to be a stepped-up basis and with this may come several questions regarding the laws and rules for the stepped-up basis. When these questions arise, then the person would need to consult an Expert to gain the answers that they need regarding stepped-up basis.
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