Discussion:100% step-up or 50% step-up?
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
(Difference between revisions)
| Revision as of 16:31, 26 January 2009 Wjalverson (Talk | contribs) (to Dennis: as fo) ← Previous diff |
Revision as of 13:49, 27 January 2009 Taxtamer (Talk | contribs) (I guess I don't) Next diff → |
||
| Line 25: | Line 25: | ||
| Any and all assistance in this matter is greatly appreciated. }} | Any and all assistance in this matter is greatly appreciated. }} | ||
| + | |||
| + | {{ForumReplyPost|UserID=Taxtamer|Date=27 January 2009|Text=I guess I don't follow how there could be a 100% step up. The OP doesn't indicate that there was any retained interest when H gifted the TIC interest to W in 1998. Sounds to me like 50% of the property gets the step up. | ||
| + | Typically the special use valuation produces a markedly LOWER value than appraised value, so I doubt you will get any help from that. Also, there are several qualifications which must be met before special use value can apply. Here's a good summary from U of Nebraska: https://www.msu.edu/~betz/estateplanning/2004%20EstatePlnning/Neb%20Special-Use%20and%20Alternate%20Valuation,%20NF93-145.htm}} | ||
Revision as of 13:49, 27 January 2009
Discussion Forum Index --> Advanced Tax Questions --> 100% step-up or 50% step-up?
Discussion Forum Index --> Tax Questions --> 100% step-up or 50% step-up?
Wjalverson (talk|edits) said: | 23 January 2009 |
| I researched this question before posting, but I can not find an answer. John Doe inherits 500+ acres of land from his mother in 1970. All parties and the land resides in Missouri. His basis in the land is determined via appraisal at $1,000 per acre. He is married at the time. In 1987 John Doe creates a Trust and becomes Trustee of the Trust Agreement of John Doe. At the same time, his wife Jane Doe becomes Trustee of the Trust Agreement of Jane Doe. In 1998 John Doe, Trustee of the Trust Agreement of John Doe, conveys via Warranty Deed an undivided one-half interest of the land to Jane Doe, Trustee of the Trust Agreement of Jane Doe. The two Trustees hold the land as Tenants In Common. In 2008 John Doe dies. Does 100% or 50% of the property get a step-up in basis to FMV at the DOD? I know the answer is 50% if the property was held as Joint Tenants. Additionally, does anyone have experience with "farm real property valuation method” IRC § 2032A? | |
| 23 January 2009 | |
| Did John have the right to the income from or the use of the land in Jane's trust? | |
Wjalverson (talk|edits) said: | 24 January 2009 |
| Yes. The only land in Jane's trust was the undivided one-half interest conveyed via Warranty Deed in 1998. | |
| 24 January 2009 | |
| Asking about §2032A and trying to find wiggle room for 100% inclusion seem mutually exclusive...♫
If you don't know why the trusts were set up you are starting out in a deep hole. | |
| 25 January 2009 | |
| Sounds like Sec. 2036(a) would apply, and Jane's land held in trust would need to be included in John's gross estate. | |
| 25 January 2009 | |
| Then what would have been the purpose in establishing a joint tenancy and putting the property in separate trusts? | |
| 25 January 2009 | |
| I think the OP said the property was held in TIC. The JT reference was just a comment about Sec. 2040. | |
| 25 January 2009 | |
| TIC was created specifically to transfer into two trusts. Why? Theoretically you can do this and guarantee full inclusion and consequent step up whichever spouse dies first, but that would require a slight alteration in the fact pattern. | |
Wjalverson (talk|edits) said: | 26 January 2009 |
| to Dennis: as for Sec 2032A and 100% inclusion my interest is either and not both. If the "farm real property valuation method" results in a significantly higher value than the appraisal of the land just after the DOD, then at least the gain will be less if I can not find a way for 100% inclusion of the land for a step-up in basis. I've telephoned the attorney to specifically ask why the property was set-up as TIC and not JT.
What do you mean by "that would require a slight alteration in the fact pattern."? Any and all assistance in this matter is greatly appreciated. | |
| 27 January 2009 | |
| I guess I don't follow how there could be a 100% step up. The OP doesn't indicate that there was any retained interest when H gifted the TIC interest to W in 1998. Sounds to me like 50% of the property gets the step up.
Typically the special use valuation produces a markedly LOWER value than appraised value, so I doubt you will get any help from that. Also, there are several qualifications which must be met before special use value can apply. Here's a good summary from U of Nebraska: https://www.msu.edu/~betz/estateplanning/2004%20EstatePlnning/Neb%20Special-Use%20and%20Alternate%20Valuation,%20NF93-145.htm | |
