Tax Guru-Ker$tetter Letter

Thursday, February 05, 2004

Basis of Inherited Property
I received the following email:

On your web page http://www.tfec.com/faq/depreciation.htm you mention the following:

"When you pass away, the property receives a new stepped up tax cost basis
for your heirs, effectively wiping out the capital gains (including all
depreciation recapture) that accrued during your lifetime. "

Can you site an IRS publication, ruling, opinion, etc. that I can read to
confirm and understand fully the implications of this statement?

Thank you.

My reply:

That concept has long been part of the tax code.

For example, you can see it on Page 9 of Publication 551, which you can download from the IRS website:

Inherited Property
Your basis in property you inherit from a decedent is generally one of the following.
1) The FMV of the property at the date of the individual’s death.
2) The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation.

The basis and accumulated profit that the decedent had is no longer relevant.

I hope this helps.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/05/2004 03:14:00 PM Send this post: