New Step-up Basis vs. Old Basis of Rental Property

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Message Board New Step-up Basis vs. Old Basis of Rental Property

This topic contains 1 reply, has 2 voices, and was last updated by Renee Rodda 2 months ago.

  • Author
  • #147762
    Ellick Huang

    Taxpayer and his spouse owned a few residential rental real estates for many years.  Two years ago, husband passed away and wife filed a Form 706 for him.  Then all her properties stepped up to FMV according to the rule of community property or joint tenancy for either 100% or 50% step-up at a date of death from the taxpayer.  I have two related questions to ask and appreciate someone could help, thank you very much!

    1.  From the date of death of taxpayer, we need to start using a new step-up basis and a brand new depreciation period (e.g. 30 years) to depreciate the same old properties again.  Is that true?

    2.  Can she just leave a memo entry on the depreciation schedule for each of her rental properties to disclose how much was the stepped-up amount and keep using the old depreciation schedule after DOD since the surviving spouse is near 70, and she is not interested to get more depreciation write-off and pay more capital gain tax later.


  • #147909
    Renee Rodda

    1. Yes, the properties will be depreciated with the new basis and new depreciation period after DOD.

    2. Depreciation is allowed or allowable, so even if she doesn’t take the depreciation on her return it reduces her taxable basis in the property.