Do heirs get stepped up basis for real property

2 Replies

Here's a question for all you probate attorneys out there. My guess is that it's a softball but google couldn't even hit a slow pitch so here I am. 

Scenario:  Two brothers own a piece of real property together 50/50. Title is vested as tenency in common. Brother B passes away intestate. Brother A still owns property 4 years later with brother B still on title as 50% owner. No probate has occured. 

Question. Assuming probate occurs and brother b's heirs split his 50% with brother A, now they're all on title and want to sell the property. Do brother B's heirs get a stepped up basis on his 50% based on the value of the home at his passing?  

Hey Brett, you are looking for a Tax attorney, not a general Probate Attorney, to help you with this matter. Generally speaking, heirs of B, under federal taxation rules, have a stepped-up basis on their 50%. If they pledge and donate a portion of that 50% back to A, A steps into the shoes of that basis, but is responsible for a portion of the gift tax that B's heirs face from the donation. If heirs of B were to outright transfer, for cash value or otherwise, to A, a portion of that 50%, the same stepped up basis exists for A. 

Generally speaking, B's heirs would have to have *some* kind of conveyance prior to the sale of the property to A, otherwise you're just dealing with a gratuitous gift of cash, and heirs of B would have to pay gift taxes.

These general rules may be impacted by additional facts that exist not available, and I would highly recommend that anyone facing a similar problem to this schedule a time to speak with a Tax Attorney licensed to practice before the U.S. Tax Court for more information on how the Tax Code applies to their specific business deal. This is not legal advice, nor should it be acted on. It is for educational purposes *only*. 

Don't worry about Federal or State taxes. It's property taxes that will be reassessed and be a challenge.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here