Advanced Underwriting Consultants

Question of the Day – May 2

Ask the Experts!

Here’s the question of the day.

Question:  My client made a gift of highly appreciated real estate to family members last year.  The client passed away this year.  Do the new owners receive a step-up in basis due to the original owner’s death?

Answer:   No.

Capital assets included in a decedent’s taxable estate at death get a step-up in basis to full fair market value.  Thus, someone inheriting capital property will be able to sell that property shortly after the decedent’s death with little or no capital gains tax.

Certain kinds of transfers prior to death may still cause the asset to be included in the decedent’s estate if the transfer was made within three years of a decedent’s death.  These kinds of transfers include gifts with a retained interest or gifts of life insurance.

An outright gift of property, even if done one day prior to the decedent’s death, gets carryover basis treatment, and there’s no step-up in basis for the recipient.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.