Don’t confuse ‘stepped-up basis’ with property tax basis

DEAR BOB: I read your recent item about property”stepped-up basis” with great interest, but I wish you had taken itfurther. Suppose an owner deeds you a house purchased for $100,000, which isnow worth $300,000, and you live in it the rest of your life. Won’t you bepaying taxes on $100,000 and be way ahead of the game? –Martin A.

DEAR MARTIN: You seem to be confusing apples with oranges.”Stepped-up basis” to market value refers only to the adjusted-costbasis for inherited property. In other words, the owner died and you inheritedthe property. Stepped-up basis is very important when the heir decides to sellthe inherited property.

Purchase Bob Bruss reports online.

For example, if your basis for a property is $100,000, butit is worth $300,000 on the date of your death, your heir’s stepped-up basis is$300,000. When the heir sells that property, his taxable capital gain is onlythe amount exceeding $300,000.

This is a huge tax savings over a lifetime gift. Instead, ifyou give the same property to someone before you die, that person takes overyour low $100,000 adjusted-cost basis in this example. If the donee then sellsthat property for $300,000, there is a $200,000 taxable capital gain.

Depending on local property tax assessment laws where thereal estate is located, and the relationship of the person receiving theproperty, that person might be able to take over your current below-marketproperty tax assessment. However, that has nothing to do with “stepped-upbasis” for inherited property.


DEAR BOB: We are not happy with our listing agent, but wehave a signed listing contract. How can we change agents or sell for sale byowner (FSBO)? –Leah M.

DEAR LEAH: I hope you didn’t sign a long-term listing beyond90 days.

If you are unhappy with your listing agent, your bestrecourse is to contact the agent’s brokerage owner or manager. Explain thesituation and ask that your listing be transferred to the firm’s top salesagent for your area to complete the listing term.

Transferring a listing means the original listing agent willget a referral commission when your home sells, typically 10 percent of theoffice’s gross commission. A listing transfer keeps everybody happy at thatbrokerage so the firm will actively promote your listing, especially your newlisting agent.

In today’s slowing real estate home sales market, youdefinitely don’t want to risk become a FSBO. If you want to receive top dollar,don’t even consider selling FSBO because you need all the professional help youcan get.


DEAR BOB: I have a living trust. After I die, what does thefinal beneficiary have to do, such as filing court papers? I have followed yourcolumn for many years and have done very well investing in real estate.–Gloria T.

DEAR GLORIA: Congratulations on your successful real estateinvestments.

When your revocable living trust “matures” afteryou pass on, your successor trustee (such as a surviving spouse, trusted friendor relative, or bank trust department) will distribute your living trust assetsaccording to the terms of your living trust.

No probate court action is required. It is that simple. Moredetails are in my special report, “24 Key Questions Answered: Living TrustSecrets Reveal How to Avoid Probate Costs and Delays,” available for $5from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

Distributed by Inman News

To search and research real estate data for more than 130 million properties nationwide, sign up for a FREE trial to RealtyTrac.

For the latest real estate news and trends get a FREE issue of our award-winning real estate newsletter, the Housing News Report.

Related Posts

Leave a Reply

Copyright © 2017 Renwood RealtyTrac LLC - All rights reserved