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Estate Tax

Howard Smolin's Profile

The home of a decedent became an asset of his estate upon his death. His three children are fiduciaries of the estate. If the estate sells the home, does the cost of the home receive a stepped up basis or is the original basis carried over to the estate when the estate was established?

Answers

Tony Morales
Title: Certified Public Accountant
Company: James, Surman & Goldberg CPA
(Certified Public Accountant, James, Surman & Goldberg CPA) |

The step-up in basis occurs at the date of death of the decedent. The FMV of the home as of that date is now the new basis of the home for the estate. If the sale of the house occurs subsequently within the estate, then use the new step-up cost basis. Ideally, when the sale occurs shortly after date of death, there is little to no gain/loss reported because of this step-up in basis.

Topic Expert
Jake Feldman
Title: Managing Director
Company: Global TaxFin Advisory Group LLC
(Managing Director, Global TaxFin Advisory Group LLC) |

One can also make an election on IRS Form 706 to choose six months from death as the alternate valuation date for stepped up basis but it would have to apply to all the estate assets, not just home. Presumably, you only do this if it will reduce the combined estate and future capital gain taxes.

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