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

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

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

Answer is A - If Brittany and Brad owned the home as community property with survivorship rights, Brad's tax basis in the home is $800,000

Because, under community property with survivorship rights the survivor will get his/her spouse share and the tax basis will be calculated on double step up basis. (I.e. based on the market value at the time of death)

So the Brad's tax basis will be $800,000

If it is Joint tenants, then the survivor's spouse share will inherit to him/her but the tax basis will be calculated on single step up basis. In this case, the basis would have been 650,000 (500,000/2 + 800,000/2)