Inherited House

[PatE]

Client inherited a house from her father and sold it.  Do I use the Market Value or the Assessed Value as basis?  There is 100k difference.

Thanks

 

 

[BulldogTom]

The Basis is the value of the Home on the Date of Death.   If the client did not get an appraisal and the sale happened very close to the Date of Death (like within 90 days - my suggestion, not IRS rule) you probably can get away with the sale price as the DOD valuation.   If the sale is further out than 90 days, you should have an appraisal done for DOD valuation.   

Tom
Longview, TX 

[RitaB]

10 hours ago, PatE said:

Client inherited a house from her father and sold it.  Do I use the Market Value or the Assessed Value as basis?  There is 100k difference.

Thanks

 

 

Agree with Tom.  If you mean county property tax assessment value, that's not particularly accurate here. 

[Pacun]

I think you can use the basis: FMV at the time of death or an appraisal 6 month later.  If you sell it within those 6 months, you can use the selling price as the basis if it is sold to a non-related person. 

[TexTaxToo]

I believe the option to use the FMV at 6 months after death only applies to the estate tax.  For the step-up in basis for capital gains, you must use the FMV at the time of death.  As Tom said, you can probably get away with using the sales price if the sale happens soon after death, but there is nothing in the law that allows that.

[DANRVAN]

On 4/8/2023 at 10:38 AM, Pacun said:

I think you can use the basis: FMV at the time of death or an appraisal 6 month later

You can elect to use the alternative valuation at 6 months after date of death per section 2032  if the value of the assets has decreased since date of death;  and if an estate tax return is filed.

 

Section 2032(a)(1) allows the use of value on date of disposition if the asset is disposed within 6 month from date of death.

 

 

[DANRVAN]

On 4/8/2023 at 7:59 AM, BulldogTom said:

 If the sale is further out than 90 days, you should have an appraisal done for DOD valuation.   

Depending on how far out the sale was from DOD,  I might get an opinion from realtor to see if there was a significant change in real estate market since DOD.

[DANRVAN]

12 hours ago, TexTaxToo said:

I believe the option to use the FMV at 6 months after death only applies to the estate tax.  For the step-up in basis for capital gains, you must use the FMV at the time of death

 

But per the uniformity of basis rule 1.104-4 the basis to the estate passes to the heir.

[DANRVAN]

To clarify, the alternate 6 month valuation is an election per section 2032 made with a timely filed form 706.

 

In order to use the alternate valuation date, the value of the gross estate must have decreased since the date of death.  Therefore an appraisal must also be made at DOD to determine if there is a decrease in value.  The only practical purpose for the election is to decrease the amount of estate taxed owed.

 

When the election is made, any assets disposed within 6 months of date of death are valued at date of disposition;  all other assets are valued at 6 months from date of death.

 

If the section 2032 valuation is used, then the basis for gain or loss is determined at six months from DOD.

 

 

 

 

 

 

[DANRVAN]

51 minutes ago, DANRVAN said:

gain or loss is determined at six months from DOD

 

or date of disposal if within 6 month.