Round 2 on Estate Tax

My wife's sister wrote the following about their mother's estate: Her accountant said "The info needed is not the value of the estate at death vs. at the time it was liquidated; rather, it's the capital gains or losses (change in value of assets between when they were purchased and when sold)."

I thought that upon death the estate got stepped up in basis to present value. And that runs contrary to "change in value of assets between when they were purchased and when sold". What am I not understanding?

Dick

Reply to
Dick Adams
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Assuming there is no issue of estate tax, you're both right. When property of a decedent is sold within a short time after death, the capital gain is generally zero.

But not always. Property might not be sold right away. Or it may in fact have gone up or down in value during even a fairly short time.

One thing I don't remember off the top of my head is whether alternate valuation date, if chosen, can be a factor in this as well, though my recollection is that it is - that if you use the alternate valuation date, that is the value you use to calculate capital gain.

If there is an issue of estate tax - that is if the gross value of the estate is over the exemption amount ($5 million for people dying this year and next), then the actual value of the estate assets is also required, and that goes on an estate tax return rather than an income tax return.

___ Stu

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Reply to
Stuart Bronstein

In Round 1 you stated that the decedent died in 2009. The 2009 rules included a change in basis based on the date of death. Any shares sold subsequent to the date of death would use the 2009 date of death FMV. Original purchase prices would not be relevant.

Reply to
Alan

That you're married thus your wife (or her relatives, by substitution) is always correct? ;-)

Without knowing if this was a 2010 death, I can't say for certain that your view should prevail.

Reply to
D. Stussy

If date of death was 2010 then it is true that cost basis may be inherited -- if you elect the rule that allows you to not pay inheritance tax, and these assets are not part of the $1.3M or more of assets that can be stepped up by a total of $1.3M. Basis may be stepped up or stepped down to time of death, or to 6 months after (provided that all assets follow the alternative valuation date). That's my understanding.

Reply to
removeps-groups

Maybe it's just me, but i can't get Sister Mary Severe (and her ruler) out of my mind. "Mind your antecedent!"

The information needed for WHAT, please.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

Phil, The information is needed to determine gain or loss on sale of inherited investments. I am confronted with an Tax guy who does not under stepped-up basis.

Dick

Reply to
Dick Adams

Gotcha. So, piecing everything together, you should be able to confidently tell your bride that the lawyer is full of beans. If she inherits any investments her basis will be their value as of the date of death, and that's easy information to find without the lawyer's assistance.

Things are more problematic if the lawyer's lack of knowledge is affecting estate administration. She might want to discuss this with her sister.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

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