What is Community property basis step-up?
In short
In community property states, when one spouse dies, both halves of community property, not just the decedent's half, get a new basis equal to fair market value, if at least half is included in the decedent's estate.
Key takeaways
- In other states, only the decedent's half of jointly held property gets the step-up.
- Nine states are community property states, and a few more allow couples to opt in.
- It can eliminate built-in gain on appreciated assets for the surviving spouse.
Where it's tested
TCP: Estate & Gift Tax Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client's total estate is well below the $15 million exemption. The client asks whether to gift highly appreciated stock to children now or hold it until death. From a pure tax standpoint, which is generally better and why?