11.4 Sale or Trade of Business, Depreciation, Rentals: Sales, Trades, Exchanges
I just sold a commercial rental property my wife and I had purchased
thirty years ago (before she passed away) and I want to know how to figure
my cost basis. Is it the full appraised value at the time of her death, or
is it just half?
The answer depends on in which state you live in. Generally, the basis
of property you inherit is its Fair Market Value (FMV) at the date of the
decedent's death. If you live in a community property state (Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), and
inherit your spouse's interest in a property held as community property, then
the basis for the entire property becomes the FMV at the date of your spouse's
death. This also assumes that at least half the value of the community property
interest is included in the deceased spouse's gross estate. In other states,
where the property is owned by you and your spouse as joint tenants, tenants
by the entireties, or tenants-in-common, the basis of the one-half that your
spouse owned would be increased to one-half of the FMV of the property at
the date of death. The basis in the one-half that you owned would remain at
the one-half of the pre-death adjusted basis. The new adjusted basis is, naturally,
subject to all future routine basis adjustments until the property is either
sold or otherwise disposed of.
References:
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