Tax basis

Technical topics regarding tax preparation.
#1
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California
Taxpayer's parents set up a by-pass trust and put a rental property into it in the 1970's.

Taxpayer's dad passed away in 2005. The rental activity of the property started being reported in the by-pass trust tax return in 2005 after taxpayer's dad passed away. The by-pass trust got a stepped-up basis on the property at that time. Lets say the stepped-up basis was $500,000.

Taxpayer's mom just passed away in 2020. At this time, a total of $130,000 depreciation was claimed on the property from 2005-2019 in the by-pass trust tax returns.

Taxpayer is the beneficiary. She had inherited the rental property and therefore from now on she will report the rental activity of the property in her personal tax return. Is her starting tax basis on the property $370,000 ($500,000 - $130,000)?
 

#2
Doug M  
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Her starting basis is $500,000 cost basis, $130,000 acc'd depreciation. The unrecaptured §1250 follows.
 

#3
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358
Joined:
15-Oct-2017 12:16pm
Location:
California
Thank you Doug for the response.

Does that mean the tax basis of the daughter on the rental property is not reduced by the depreciation that was claimed by the bypass trust before? If you do not mind, can you elaborate your response in more detailed?
 

#4
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WA State
She steps into the shoes of the trust.
Her deprecation will continue in year 15 of her hands instead of starting at year 1.
~Captcook
 


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