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A Canadian resident owned real property in Florida. He has

Customer Question
died and his estate is...
A Canadian resident owned real property in Florida. He has died and his estate is administered in Canada. An ancillary estate for the Florida real estate has been opened. When the Florida real estate is sold, does the executor get to step up the basis to market value (on the Form 1041) as you can for a US citizen?
Submitted: 8 years ago.Category: Tax
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9/2/2009
Tax Professional: Merlo, Accountant replied 8 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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HelloCustomer

A stepped up basis is not used even by US citizens when valuing the property for estate tax purposes.

A stepped up basis is only granted to the heir of a property for purposes of determining any taxable gain he may have on the sale.

As an example, if a home is valued at $100,000 at the time of a decedent's death, if the beneficiary sells the home then he is only liable for tax on the difference between the selling price and the $100,000 stepped up value.

But for purposes of estate tax, the home is still valued at $100,000 for purposes of determining the entire estate value.

If this was helpful please press the Accept button.

Thank youCustomer

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Customer reply replied 8 years ago
My question had to do with Form 1041, not the estate tax.

When the US executor files a 1041 (for the US part of the estate), in calculating capital gains, may the US executor use the stepped up (death valuation)? Or does the fact that the decedent was a foreigner (a Canadian citizen) disqualify the estate from using the stepped up basis?

Thanks
Tax Professional: Merlo, Accountant replied 8 years ago
Hello again,

I apologize for the confusion. I did not even see the form # XXXXX you listed in your original question and just assumed you were referring to the estate tax.

Yes, when you sell the property, the income to the estate is figured using the stepped up basis of the property, which would be the fair market value on the day the decedent passed away.

If this was helpful please press the Accept button.

Thank you again, and let me know if you have more questions.

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Customer reply replied 8 years ago
So it does not matter that the decedent was a Canadian citizen? His estate still gets the benefit of the stepped up basis?
Tax Professional: Merlo, Accountant replied 8 years ago
Hello again,

No, it does not matter that he is a Canadian citizen. As long as the estate itself pays any applicable estate tax which is due, he is entitled to a full stepped up basis in the property the same as a US citizen.

If this was helpful please press the Accept button.

Thank you.

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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