stepped up tax basis question

This will depend on how Washington defines community property. Normally community property gets its basis increased to the date of death value when one spouse dies.

The issue will be, apparently, whether jointly held property (as opposed to specifically community property) is still considered community. If not, the basis will be stepped up with respect only to half of the value of the property.

Stu

"sandy" wrote

To continue......the IRA does not receive a "step-up" in basis. Each distribution will be income to you unless there was some after-tax contributions to the IRA.

As long as one-half of the community property is included in valuing your husband's estate, then you get a 100% step up in value. I have always used the average of the high and low prices on the date of death.

"sandy" wrote

Assuming you do need to compute the basis (see other posters' comments, e.g. are all stocks in an IRA?), then the IRS says to use the "fair market value," where FMV is "the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts" (Pub. 551). The average of the high and low prices for the date of death is considered a reasonable estimate of FMV in your situation (and others) and is customary. Note that there is often little difference between using either the high or the low, so often there is nothing to be anxious about; nothing to cause worry were one to be audited.

"Elle" wrote

The IRA issue is MOOT. It's income when it gets distributed - unless there was some basis (meaning after-tax or non deductible contributions made in prior years) in the IRA.

There's no point in even looking at the IRA investments and dreaming that you get to step-up the basis.

"Paul Thomas, CPA" wrote

I meant it is not clear whether the stocks of which the OP wrote are in an IRA. If they are in an IRA, then what you and others wrote (on IRAs) is of course correct.