My client has four rental properties. I indicate one sample here. The other three would be the same
The taxpayer and spouse own the property together as joint tenancy in CA
The cost of basic property was in service 2013 $100,000 and prior depreciation $80,000 before spouse's death in 2022
2022 spouse passed away. The taxpayer appraisal the property DOD (or alternate value in 6 months) $300,000
Q1: How correctly to count the step up basic cost of the property: her part $50000 ($100000/2 still remain the same) + spouse part (she inherited $300000/2) $150000=$200000
Or it is automatic to step up $300000 on 2022
Q2:
Per my understand, prior depreciation before spouse's death is NOT relevant any more? How to code "mass out of service or retired property" related to prior DOD of spouse OR just delete that asset prior DOD in Proseries Professional and just input the new asset on DOD
Q3. When the surviving spouse sells the property, we dont have to worry about prior depreciation prior dod of spouse any more (before 2022). Am I correct ?
Any advice would be appreciated, specially in tax seasoning
Best Answer Click here
Answers will probably vary depending on whether you are in a community property state, I am in comm. prop., and surviving spouse starts over at 300K.
I usually enter the date of death as sale date on old asset with no price to stop depreciation and
then add a new asset with DOD as acquisition date.
Answers will probably vary depending on whether you are in a community property state, I am in comm. prop., and surviving spouse starts over at 300K.
I usually enter the date of death as sale date on old asset with no price to stop depreciation and
then add a new asset with DOD as acquisition date.
@mybesttaxservice1 wrote:
The taxpayer and spouse own the property together as joint tenancy in CA
Okay, it is a Community Property State, so it completely resets and the prior depreciation completely disappears.
As Jeff said, on the existing/old asset enter the Date of Death as the "disposition" date and leave the sale price BLANK.
Then create a new asset, enter the FMV on the Date of Death, and start depreciating it beginning on the Date of Death.
Dear Jeffmcpa2010
I appreciate this .
That meant in community property state like CA, we use $300000. Some other tax expert advised to keep track half of tax payer basic and depreciation as normal and stepped up half cost basic FMV on DOB part of deceased spouse. LOL
Can you please tell me a little more detail how to enter the date of death as sale date on old asset with no price to stop depreciation? Did you enter on sche E /dispose property /sale price $0/(must purchase price also, right?)?
Again thank you for your time
Oh I believe both tax experts here TaxGuy Bill and Jeffmcpa
I appreciate both of you to help me
We are lucky to have both you here !
But you can also depreciate it for the months in 2022 that the spouse was alive, right?
Dear abctax55 and BobKamman
Thank you both shared time and advised me
Yes I should depreciate portion of year on old asset until dod (Sep 2022) and portion new asset on dod (Sept 2022) and so on
The hard part is not know how to code "retired old asset " and stop depreciation on old asset LOL.
I am thinking because of option 6 month alternate FMV value. If we can delay new asset until Jan 01 2023 for simplication. And stop prior dod depreciation for the beginning next year 2023.
Any suggestion? Thanks in advanced
I'm not sure you can use alternate valuation date for joint tenancy property that immediately becomes the property of the survivor. Isn't date of death then the date of distribution?
"In the case of property distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent’s death such property shall be valued as of the date of distribution, sale, exchange, or other disposition."
But why would you want to cheat your client out of higher depreciation deductions for 1/3 of the year? Just because it's the lazy thing to do?
I appreciate you. It works as input "no sale price". Made my job easyLOL
Thank you Jeff
Dear BobKamman
Thank you for sharing info
I myself thought it is choice of choose DOD or alternate FMV in 6 months
Since normally taxpayers can appraisal the property later (not in dod )
Again, thank you
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