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Posted by D. Stussy on June 6, 2006, 7:10 am
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>>>>> Husband and wife lived in house 2 out of last 5 years.
>>>>> Husband died in May 2005, wife sold house in July 2005.
>>>>> Widow filing Married filing jointly. She gets a stepped up
>>>>> basis for his half of house plus half of their "old" basis.
>>>>> Does she get the $500,000 exemption or the $250,000
>>>>> exemption?
>>>> I'd have to double check but my instincts tell me she gets
>>>> the $500K.
>>>>
>>>> If she waited and sold in 2006 she would only get the $250K.
>>>> I believe that the key is that the house is sold as part of
>>>> a JOINT return.
>>> I would of course love to agree with you, Gene. But what I
>>> think puts the kabosh on it is the fact he died first, and
>>> then she sells the house which only she now owns. I would
>>> go for stepped up basis and then compute the gain to see if
>>> under 250, which it probably is.
>> I think the issue is, what controls whether or not the $500K
>> is available, rather than $250K? If it's the filing status
>> on the return, where $500K is available on MFJ, then that
>> should apply here.
>>
>> Consider a couple who each own a house when they marry. One
>> sells his house; the entire $500K is available on the MFJ
>> return, even though the house was separate property. (Does
>> that apply even if the house was sold just prior to the
>> marriage?)
> I understand what you're saying, but I think that since he
> was dead when the home was sold, means his 250 exclusion
> died with him.
I generally agree, but one point which might change the
answer: I note that he died in May and the house was sold
in July. Around here, escrow takes 60-90 days. If he
actually signed the escrow paperwork, then he might still be
considered as having sold the property and thus his $250
exclusion may apply. [I.e. he "sold" the property even if
transfer of title wasn't recorded until after his death.]
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