Discussion:Step up in Basis (Community Prop State)

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Discussion Forum Index --> Basic Tax Questions --> Step up in Basis (Community Prop State)


Discussion Forum Index --> Tax Questions --> Step up in Basis (Community Prop State)

Ztom (talk|edits) said:

6 April 2013
Have client that sold rental in MD. Filing Joint, Spouse passed away Dec 31, 2011. I assume they both get stepped up value for Federal and Calif. but don't quite know what to do with MD. Hopefully can step up value there also. Any help would be appreciated

Thank ahead of time for your help

Ckenefick (talk|edits) said:

7 April 2013
I see no reason why you wouldn't get a step-up all the way around. If state basis is based on fed basis, we have a new basis.

Ztom (talk|edits) said:

8 April 2013
Interesting, kind of agree, still not sure about step up for MD

Ckenefick (talk|edits) said:

8 April 2013
Z, what is your hang-up - that MD has some law on its book de-coupling from federal basis in the case of inherited property? If so, you'd want to look at MD law.

I don't think the community prop aspect changes much. If someone lives in FL, and dies, and owns property in NC, fed basis gets adjusted. And if NC basis is predicated on fed, NC gets a step-up also.

Kevinh5 (talk|edits) said:

8 April 2013
Somewhere in the cobwebs of the windmills in my mind there is the thought that real property held in non-community property states by a couple living in a community property state must be declared to be community property? Or do I have that backwards?

Kevinh5 (talk|edits) said:

8 April 2013
From "Estate Planning Applications", 4th Edition, Ted Kurlowicz, The American College, page 303:

"Real property is usually controlled by the law of the situs of the property. It generally retains its nature, no matter where the owners of the property are domiciled. In other words, if the real property is located in Rhode Island, it will continue to be governed by common law, even if the owners live in California, before, during, or after acquiring the property. Likewise, a married couple living in Montana who purchase land in Arizona will own a community-property interest in the land."

This is from one of the texts from when I earned my ChFC 12 or 13 years ago. Thought I remembered it correctly.

Ckenefick (talk|edits) said:

8 April 2013
Yeah, this issue could get muddy. Does CA law treat the MD rental as community property? If so, does this mean we step up full property for federal purposes? If so, does said step-up extend to MD? Does MD treat this property as community property (which is where I was going with my previous comments)? CA also has a quasi-community property law, which might be at play.

NC has a community property statute, for example. Chapter 31C. I wrote an article on it many years ago. Wondering if MD has something similar. Here's the NC law:

Chapter 31C. Uniform Disposition of Community Property Rights at Death Act. § 31C‑1. Application. This Chapter applies to the disposition at death of the following property acquired by a married person: (1) All personal property, wherever situated: a. Which was acquired as or became, and remained, community property under the laws of another jurisdiction; or b. All or the proportionate part of that property acquired with the rents, issues, or income of, or the proceeds from, or in exchange for, that community property; or c. Traceable to that community property; (2) All or the proportionate part of any real property situated in this State which was acquired with the rents, issues or income of, the proceeds from, or in exchange for, property acquired as or which became, and remained, community property under the laws of another jurisdiction, or property traceable to that community property. (1981, c. 882, s. 1.)

Ztom (talk|edits) said:

9 April 2013
I contacted MD and received email stating the Md basis is same as Federal Basis, good new for my client

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