INHERITED FARM BY SPOUSE

[MOBEE]

Just want to make sure I am thinking this through correctly. Taxpayer had a rather large cattle farm. Died in December 2011. Spouse sold all farm items in February 2012. They have always filed MFJ but farm was all in his name. I am thinking she inherited the farm and should get a stepped up basis on the sale. Correct?

[jainen]

>>I am thinking she inherited the farm<<

Why are you thinking that?

[MOBEE]

I am thinking that she inherited the "business" ... the farm because her name was not on the farm property.. only his. Am I thinking wrong?

[jainen]

>>I am thinking that she inherited the "business"<<

Yes, but why do you think that? Her name was not on the "property," but do you know she was not a partner or joint owner anyway? Was her name, for example, on the land? Was it an LLC? If not, what made her the heir? A will or probate? A trust? Did she at least tell you she had inherited it? Like, you know, facts.

[MOBEE]

Farm was on 1040 tax return schedule F... not an LLC. Yes her name is on the land.. that is where their home is..but she only sold the equipment and cattle pertaining to the farm which was in his name. She still owns the land and the home located on it. There is, to my knowledge, no will .. just surviving spouse inheriting all property. The estate will not be probated.

[Guest Taxed]

If she was selling assets (equipment that may have depreciation) then disposition of business assets form must be completed. Don't kbow how cattle is depreciated but one of my good clients who had a construction business died few years back (Sch C for business). His widow started selling the trucks and big construction equipment almost right away to pay creditors. Had to go through that with a fine tooth comb due to lack of details. I found out the equipment was sold around tax time (6 months after death).

[MOBEE]

She just sold all of the livestock and equipment to the same party in one transaction.. two months after husband's death. Think this would be stepped up basis and disregard depreciation taken.

[jainen]

>>no will .. just surviving spouse inheriting all property<<

That could only happen with property held in joint tenancy or tenancy by the entirety. Therefore only half the property gets a stepped-up basis.