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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15610
Experience:  15years with H & R Block. Divisional leader, Instructor
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A widow inherited in 2002 a rental property, the stepped up

Customer Question

a widow inherited in 2002 a rental property , the stepped up basis was 100k. the husband original purchased it in 1995 for 55k? the widow sold the property to her son for 40k,which he took a mortgage for, when the market went down. the widow never claimed the loss of 60k on her tax's as it was a related party sale. the widows accountant never readjusted the depreciation schedule from 1995 to show a new basis in 2002. the sons also carried forward with the same depreciation scale in place but did add his cost of 40k to the amortization/depreciation. What is the sons cost basis? should the dedication amount be adjusted if so to what?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


The son's depreciation starts with his purchase, $40,000. He would use $40k as his basis (less land value for depreciation). He cannot just add his mortgage to the depreciation schedule that was used by the father.

The widow would have inherited at fair market value on the date her husband passed as long as she was not a part owner.

Customer: replied 1 year ago.
since the mother never claimed the loss from a related party sale does it get added back somehow?
Expert:  Robin D. replied 1 year ago.

The mother actually made a gift of the amount she sold for less than fair market value.

That does not get added back for the son to use in depreciation. Perhaps at a later sale it will assist him.

If the depreciation (additional depreciation, if section 1250 property) is more than the gain, the balance is carried over to the transferee to be taken into account on any later disposition of the property.

Please remember that you are required to rate in a positive way (look for the STARS or SMILEY FACES) so I am credited with responding.

Expert:  Robin D. replied 1 year ago.

Checking to see if you responded

Expert:  Robin D. replied 1 year ago.

You can post below if you need clarification