Question

Cody and Chelsi, who are married to each other, own their home together titled as community property. They purchased the home three years ago for $200,000. After improvements and a surge in the market, the home is now worth $400,000. If Cody died today and left his share of the home to his daughter Alyssa, what is Alyssa’s federal income tax basis in the home? a. $50,000. b. $100,000. c. $150,000. d. $200,000.

Answer 1

Community property means any property which is acquired during the marriage and such property is owned by both spouses and having equal share in property.

Therefore, Cody' share in property is 50%

Home fair market value today $400,000

Cody's Share in property (50%) $200,000

If Cody's died today then such property will be inherited by his daughter Alyssa.

Therefore Alyssa's federal income tax basis in the home would be $200,000 becasue as per federal law, federal tax basis would be decide on the basis of fair market value of property on the date of decedent's death.