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202 - Income Tax Planning E Stepped-up basis (1) Assets included in a taxable estate of a decedent receive a stepped-up basis The receivers of the bequests receive a basis in those assets equal to the fair market value at date of the decedent s death or, alternately, six months after the death The step-up in basis is available only for those assets in the taxable estate If assets are kept out of the estate, such as gifts, they will not enjoy the step-up in basis (2) Common law states have a step-up basis for half of the assets; a step-up in basis for the decedent s share of ownership but not for the survivor s share (3) Community property states have a full step-up in basis For tax purposes at death, the new cost basis is the fair market value (FMV) at the date of death for both halves of the community property, even though only one-half is included in the decedent spouse s estate (4) Property owned solely by a decedent generally receives a full step-up basis for the person who acquires it Example: Bart owned stock in XYZ, which he purchased for $1,000 in 1935, until his death in 2003, when it passed on to his son John At Bart s death, the stock was worth $250,000 John kept the stock for six months and sold it for $270,000 John has a realized long-term capital gain of $20,000 between the sale price and the date-of-death value (because it was acquired from the decedent, the holding period for the property is automatically considered long term) (5) For joint tenancy with right of survivorship, two rules are followed in deciding what is included in a decedent s estate and the surviving owner s new basis (a) Husband and wife rule Where the only joint tenants are husband and wife, half of the FMV at the date of death is included in the decedent s estate and the surviving spouse s new basis will equal half the total predeath basis and half the FMV at the date of death (b) Consideration furnished rule Where joint tenants include nonspouses, the decedent s gross estate includes that proportion of the property as the decedent s share of the consideration bears to the total consideration The new basis for each surviving co-owner s interest is his or her old basis plus an increase by the amount included in the decedent s estate split equally among the surviving joint tenants (6) For tenancy in common, the surviving spouse s cost basis at death is the amount included in the deceased spouse s estate If left to a co-owner, the new basis is his or her old basis plus an increase by the amount included in the decedent s estate Example: Lyle, Joel, and Dan purchased property as tenants in common Of the $100,000 purchase price, Lyle aid $50,000 and took a 50 percent interest, Joel paid $30,000 and took a 30 percent interest, and Dan paid $20,000 and took a 20 percent interest Years later when Joel died, the property was worth $250,000 and his estate included $75,000 because he owned a 30 percent interest If Joel left his interest to his widow, Betty, her basis would be $75,000 If he instead left his interest to co-owner Dan, Dan s total basis in the 50 percent interest he would then own would be $95,000 ($75,000 plus his $20,000 contribution) F Impact of community property and common law on basis (1) Community property states provide a decided advantage over common law states in regard to basis adjustments at death.



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1 Reporting requirements A Form 8824 is used for like-kind exchanges It must be led in the current year of exchange and for two years following the year of a related party exchange B roperty received must be identi ed within 45 days after the date on which the property is transferred, and received within 180 days after the date on which the old property is transferred, but not later than the due date of the tax return (including extensions) for the year that the old property is transferred 2 Qualifying transaction A Only the disposition and receipt of qualifying property can result in a nontaxable exchange B No gain or loss is recognized on the exchange of property (1) Used in a trade or business (2) Held for investment (3) The following guidelines are also considered when (1) and (2) apply: (a) Such property must be exchanged solely for property used in a trade or business or held for investment (b) The taxpayer s intent is important in determining if property is held for investment or trade or business (c) The length of time the new property is used for investment or trade or business is important (d) Example: Steve exchanges his apartment building in Denver for a condo in Vail that he rents out Five months after the exchange, he moves into the condo with the intention to live there for two years At that time, he plans to sell the condo for a nontaxable gain under tax laws for a residence ($250,000/$500,000 limitations) The IRS would argue that he never intended to use the condo as rental property.

ASCII Generation In VB.NET Using Barcode printer for Visual . 39 Extended Creator In Java Using Barcode creation for .The future prospects for your investment in and of itself depend on the quality of the uilding and overall market conditions We discuss the various ways to gauge a property s inherent value in 10, but it s worth pointing out here that your property should be structurally sound A building with potential for adaptation will also have stronger potential to appreciate in value in future years, as residential and other requirements change The greater the number of uses to which a future owner can put a property, the greater the chances that it will retain its value, and even become a more valuable asset The overall market conditions are something over which you have little control A glance at the history of the property s value should indicate whether or not it has seen a steady appreciation, or whether it has suffered depreciation in the past Researching the causes for past fluctuations in value may not reveal the potential for appreciation or depreciation, but such research will indicate whether any unusual circumstances were behind the fluctuations.Related: Creating UPC-E Java , PDF417 Generator C# , ASP.NET Intelligent Mail Generator

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