Discussion:1014(b)(6) & Surviving Spouse Depreciation Recapture

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Discussion Forum Index --> Advanced Tax Questions --> 1014(b)(6) & Surviving Spouse Depreciation Recapture
Discussion Forum Index --> Tax Questions --> 1014(b)(6) & Surviving Spouse Depreciation Recapture

Kamranjune (talk|edits) said:

27 August 2008
Scenario: Married couple owns a condo rental in a community property state on which they have been taking depreciation. One spouse dies in that community property state. Under 1014(b)(6) surviving spouse gets a stepped up basis.


Question: Is the depreciation, that the couple had taken prior to decedent spouse's death, subject to recapture upon a later disposition by the surviving spouse?
Knee jerk response I have gotten: "Yes, the depreciation has to be recaptured."
I'm looking for authority and I cannot find it. Code, regs, anything, please help. This question has been bugging me for years and I am hoping for a good response.
Thanks,
Kamran
Bonus Question: If the prior depreciation is not subject to recapture; can the surviving spouse simply start taking depreciation all over again from the stepped up basis amount?

Kevinh5 (talk|edits) said:

27 August 2008
1) no

2) yes

Kevinh5 (talk|edits) said:

27 August 2008
you might try filling out a profile if you anticipate people giving you cites.

Riley2 (talk|edits) said:

28 August 2008
Whenever the basis of property is determined by reference to fair market value on the date of death, or the alternate valuation date, the recapturable depreciation claimed prior to death is adjusted back to zero. See Reg. 1.1250-3(b)(2)(i).

Kamranjune (talk|edits) said:

28 August 2008
@Riley2

Okay so Riley2, your 1.1250-3(b)(2)(i) reg cite was very interesting thank you; I had not thought of looking there.

The reg cite was interesting for additional depreciation for 1250 property, and closeby 1.1250-3(b)(3) Example 2 was even more interesting for describing a non community property state situation. It refers to 1014(b)(9); which I had been waiting for someone to mention.

It seems that in non community property states, the step up in basis is reduced by 1/2 of the depreciation formerly taken by husband and wife.

This 1/2 mechanism in non community property states emphasizes the notion that in community property states there is a full disregard of the depreciation recapture; unless someone can provide authority otherwise. Again nice lead Riley2. I'm hoping for other leads, otherwise the lack of authority requiring depreciation recapture will speak for itself.

Kamranjune (talk|edits) said:

28 August 2008
By the way 1.1014-6(a)(3) Example 2 also shows the same allocation of depreciation mechanism where there is a tenancy by the entirety.

Anybody with community-property-depreciation-recapture authority or even real life experience/IRS audit?

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