Question

Brittany and Brad have been married for 15 years. Ten years ago, they purchased a personal residence together for $500,000. They owned the home jointly and have used it exclusively for personal-use. This year, when the home was worth $800,000, Brittany passed away. Brad now owns 100% of the home.

Which of the following is most accurate?

Multiple Choice

• There is not enough information to calculate the accumulated depreciation on the home

• If Brittany and Brad owned the home as community property with right of survivorship, Brad's tax basis in the home is $800,000

• If Brittany and Brad owned the home as joint tenants, Brad's tax basis in the home is $800,000

• If Brittany and Brad owned the home as community property with right of survivorship, Brad's tax basis in the home is $500,000

• If Brittany and Brad owned the home as joint tenants, Brad's tax basis in the home is $500,000

Answer 1

If Brittany and Brad owned the home as community property with right of survivorship, Brad's tax basis in the home is $500,000

Reason: When spouses hold the property as common property with right of survivorship , the surviving spouse has the tax basis of equal to the purchase value i.e. $500,000 in this case. If it were purchased a joint tenants, then Brad's tax basis is $250,000 ( $500,000 *1/2). If Brad decides to sell the property today he will have a capital gain of $300,000 [ 800,000- 500,000].