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Posted by Bob Brown on November 15, 2006, 10:06 pm
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If a spouse dies, it seems that in order to get the full
$500,000 exemption ($250,00 for each spouse), you have to
sell your house the year that one spouse dies. It seems liek
there must be more to this. Is there a way around it, to get
both exemptions but not sell the house the year one spouse
dies?
Can you sell the house to yourself?
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Posted by ed on November 17, 2006, 1:39 am
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Bob Brown wrote:
> If a spouse dies, it seems that in order to get the full
> $500,000 exemption ($250,00 for each spouse), you have to
> sell your house the year that one spouse dies. It seems liek
> there must be more to this. Is there a way around it, to get
> both exemptions but not sell the house the year one spouse
> dies?
>
> Can you sell the house to yourself?
First: If you are in a Ccommunity Property State you get a
full step-up in basis upon the death of the first spouse.,
so if you sell immediately there is no gain If the market
went up by $500,000 in the year of her death you could get
that waived also for a sale of the house. If you wait until
next year you can only get a $250,000 market increase waived
on the sale.
NOW, if you are in a non-community property state and the
first spouse dies and you sell in the same year you can get
a $500,00 exemption on the profit on the 1/2 that didn't get
stepped up in basis, plus the market increase on the part
that did get stepped up. If you wait until next year to
sell you can only waive $250,000 of market increase on the
1/2 stepped up plus the amount of profit on your 1/2 that
didn't get stepped up.
All the above is of no consequence if you keep living in the
house and don't sell it, or even if you rent it out. The
rule only applies to the SALE of the house. Your basis
remains the same. IF you DO sell the house the above
applies. If you don't sell the house, whether you live in
it or rentit out, when you die your heirs get a FULL 100%
step-up in basis to your DOD value. Let them rworry about
the taxes on the market appreciation after your DOD.
If none of the above exempt you from any tax now or when you
sell, this year or later, you can afford the taxes.(;>)]]]]<
ed
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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Posted by A.G. Kalman on November 17, 2006, 1:39 am
Please log in for more thread options Bob Brown wrote:
> If a spouse dies, it seems that in order to get the full
> $500,000 exemption ($250,00 for each spouse), you have to
> sell your house the year that one spouse dies. It seems liek
> there must be more to this. Is there a way around it, to get
> both exemptions but not sell the house the year one spouse
> dies?
>
> Can you sell the house to yourself?
Your first assumption is correct. The $500K exclusion is
only available on a joint tax return. However, your cost
basis is going to change when the joint owner dies. The
decedent's half interest in the property will be stepped up
to fair market value as of the date of death. If you reside
in one of the community property states and the home is
community property (CP), then upon the death of one spouse,
the cost basis on the total property is stepped up to fair
market value. Effectively, this would wipe out (CP) any
capital gain if the home is sold shortly after death.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bob on November 26, 2006, 11:13 am
Please log in for more thread options > Bob Brown wrote:
>> If a spouse dies, it seems that in order to get the full
>> $500,000 exemption ($250,00 for each spouse), you have to
>> sell your house the year that one spouse dies. It seems liek
>> there must be more to this. Is there a way around it, to get
>> both exemptions but not sell the house the year one spouse
>> dies?
>>
>> Can you sell the house to yourself?
> Your first assumption is correct. The $500K exclusion is
> only available on a joint tax return. However, your cost
> basis is going to change when the joint owner dies. The
> decedent's half interest in the property will be stepped up
> to fair market value as of the date of death. If you reside
> in one of the community property states and the home is
> community property (CP), then upon the death of one spouse,
> the cost basis on the total property is stepped up to fair
> market value. Effectively, this would wipe out (CP) any
> capital gain if the home is sold shortly after death.
What if the joint tenants in a CP state (in this case
California) are registered Domestic Partners? The state has
tried to equalize things for Domestic Partners, but does the
Federal Government go along with this. The $500,000
exclusion works when both partners are alive and sell, but
what happens when one partner dies as far as federal taxes
are concerned? The same as a married couple?
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Stuart A. Bronstein on November 28, 2006, 1:22 am
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> What if the joint tenants in a CP state (in this case
> California) are registered Domestic Partners? The state has
> tried to equalize things for Domestic Partners, but does the
> Federal Government go along with this. The $500,000
> exclusion works when both partners are alive and sell, but
> what happens when one partner dies as far as federal taxes
> are concerned? The same as a married couple?
The federal government would have to recognize domestic
partner community property laws for the purposes of
determining income - each partner technically earned half of
what both together earned. My understanding is that's the
reason we have joint returns for married couples now - due
to Congress's reaction to the effect of community property
with respect to income tax.
But for a rule based solely in federal law, they don't have
to permit the same effect to married couples as to
registered domestic partners.
But can someone take the exemption on the final (or estate)
income tax return of a single person who has died? If so
the result should be about the same.
Stu
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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