Q: Need advise on determining basis on property gifted from g-parents to calculate capital gains
Is it true when one spouse passes away the assets/ property/land held in a marital trust are inherited by the surviving spouse and the property at this point receives a step up basis?
If I was gifted this property and I sale it, would this be the basis for calculating the capital gains?
Lawyers, want to be a Justia Connect Pro too? Learn more ›
- (916) 704-3009
- View Profile
- Answered
A:
When you receive property as a gift from your grandparents, the basis for calculating capital gains is typically the same as what your grandparents had in the property. This is known as a carryover basis. If the property's fair market value at the time of the gift is less than the original basis, and you sell it for less than that value, you might be able to use the lower fair market value as your basis instead.
Regarding marital trusts, when one spouse passes away, the surviving spouse usually inherits the assets held in the trust. At this point, the property often receives a step-up in basis, meaning its basis is adjusted to the current market value at the date of the first spouse’s death. This can significantly reduce any capital gains tax if the property is later sold.
If you were gifted the property rather than inheriting it, the basis for calculating capital gains would remain the original basis from your grandparents, not the stepped-up value. When you decide to sell the gifted property, you would subtract this original basis from the sale price to determine your capital gain or loss. It’s important to keep accurate records of the original basis and any improvements made to the property to ensure correct calculations.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
