Originally Posted by Sue Doe-Nym (Post 389777)

This is a question I have been thinking about for some time, and it’s something that might be useful, and I don’t have the foggiest idea what the answer is.
Here goes: a couple purchased a waterfront property 25 years ago for $300,000.
Over the years, the property was well maintained, a garage added, new kitchen and bath…nothing extraordinary. Fast forward to 2023: the property is reassessed for $1.5 million. If one of the owners dies…they are husband and wife.. does the surviving spouse now own the property at the stepped up value, I.e., $1.5 million? It would make a tremendous difference as to whether or not to sell the property regarding capital gains taxes, since they haven’t been revised since the 1990s. It also raises the question of whether to hang on to the property and pass the real estate on to the next generation, with no capital gains taxes owed. I would love to hear from folks who know the answers…..interesting stuff to ponder.

Originally Posted by FlyingScot (Post 389778)

The surviving spouse does not get the stepped up value. But their kids will.

Originally Posted by joey2665 (Post 389781)

This is incorrect advice consult a professional


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Originally Posted by Sue Doe-Nym (Post 389783)

I guess my question wasn’t completely hypothetical, though that was my intention. We have gone the trust route, but the dialogue that runs through my mind involves “what ifs “ and which route would be better? In a perfect world, the property would pass on to the next generations, BUT the surviving spouse might choose to sell for a variety of reasons, not always related to money or disability. Loneliness could be a huge factor. Anyhow, interesting subject. Thanks.

Originally Posted by jeffk (Post 389787)

I'm not a tax expert and being a spouse changes the inheritance process but I will lead with a couple facts and then speculate. First, it depends as to where you reside as to the state inheritance tax and I won't have anything to say about that beyond that NH does NOT have an inheritance tax. Second, the federal exemption on an inheritance is almost $13 Million in 2023 and is indexed for inflation so it continues to increase. Now the speculation,

...if you jointly own a home with rights of survivorship, a common situation, when your spouse dies, you "inherit" their half. If their half is less than $13M (total of ALL their wealth), there is NO federal capital gains tax on the inheritance. Further, the value of their half of the property is set to the value at their time of death. You should get a couple of official estimates on the property ASAP to set the value. If you sell the property, half the purchase valuation is now reset to the current amount. If you give it to your kids at the time of your spouses death, their purchase valuation is now current value for the spouse's half but original purchase value for your half. However, if you pass it along at your death, your estate ALSO gets a $13M exemption and your half of the valuation of the property is ALSO reset to current value. THEN if your kids quickly sold the property, the taxable valuation would be any growth since your spouse died on half of the sale and effectively $0 on your half. Apparently though, in community property states (22 of the states are, including NH), where property acquired during marriage is the community property of both spouses, the property’s entire basis[ is stepped up when one spouse dies. This is a question for an attorney as to the laws in your state and the specific nature of the holding of your home. Plus state tax considerations, if any.

Originally Posted by Sue Doe-Nym (Post 389777)

This is a question I have been thinking about for some time, and it’s something that might be useful, and I don’t have the foggiest idea what the answer is.
Here goes: a couple purchased a waterfront property 25 years ago for $300,000.
Over the years, the property was well maintained, a garage added, new kitchen and bath…nothing extraordinary. Fast forward to 2023: the property is reassessed for $1.5 million. If one of the owners dies…they are husband and wife.. does the surviving spouse now own the property at the stepped up value, I.e., $1.5 million? It would make a tremendous difference as to whether or not to sell the property regarding capital gains taxes, since they haven’t been revised since the 1990s. It also raises the question of whether to hang on to the property and pass the real estate on to the next generation, with no capital gains taxes owed. I would love to hear from folks who know the answers…..interesting stuff to ponder.

Originally Posted by Shreddy (Post 389805)

Being a tax attorney, I always enjoy when these questions pop up and seeing the answers of the general public. With that said, I'll also echo what's been previously been said...seek professional advice from a CPA/attorney who specializes in this area. The benefit will significantly outweigh the cost given the "hypothetical" fact pattern :D

Originally Posted by John Mercier (Post 389808)

What is interesting is the mixing of the inheritance tax, with the capital gains tax, and the primary home exemption.
My understanding is these are all different.

Originally Posted by camp guy (Post 389817)

An extraordinarily high percentage of the population has, truly, no understanding of the immensely complicated Tax Code, both State and Federal, and yet, an extraordinarily high percentage of these people rattle on about taxes (of all types). In my humble opinion, the best answers you can get regarding Tax Code issues is from an attorney specializing in Tax Code law with whom you can sit down in a face-to-face setting and fully discuss your specific, personal issues. All other forms of information gathering will surely lead to a misunderstanding and misapplication of the Tax Code, and you, yourself will still have questions.

Originally Posted by Sue Doe-Nym (Post 389783)

I guess my question wasn’t completely hypothetical, though that was my intention. We have gone the trust route, but the dialogue that runs through my mind involves “what ifs “ and which route would be better? In a perfect world, the property would pass on to the next generations, BUT the surviving spouse might choose to sell for a variety of reasons, not always related to money or disability. Loneliness could be a huge factor. Anyhow, interesting subject. Thanks.

Originally Posted by John Mercier (Post 389824)

Be happy it is in the US and your a US resident.

Polyclad used to be owned by Cookson, traded on the London Exchange in British Pounds. Determining the value of your ESOP wasn't overtly difficult... navigating the sale and taxation was a uniquely trying experience.

Company made the buy-in experience pleasant, and the cash-out was on our own.

I am still wondering how intricate the ROTH/Traditional IRA system will be as they play around with the rules each year.

Originally Posted by Sue Doe-Nym (Post 389783)

We have gone the trust route, but the dialogue that runs through my mind involves “what ifs “ and which route would be better?

Originally Posted by Major (Post 389830)

Small world! I worked for Cookson Electronics, which was owned by Cookson Group plc and owned Polyclad, from 2000 to 2003. I cashed out my Cookson options in 2004. I don't remember a particular tax issue. Hopefully I did it correctly!

Originally Posted by John Mercier (Post 389832)

They were using ADRs by then.

The ESOP for us came in the mid-90s, and first round no one realized the limitations.

Originally Posted by John Mercier (Post 389837)

All Polyclad employees knew the executive staff. Richard wanted it that way.
I think he may have gotten it from Mike. When Mike owned the company, and for the five year tenure that he led under Cookson, he would walk the Franklin plant about once a week and talk to everyone. Joe would hardly ever be seen. He would join the crews during holiday parties.

Even after taking the presidency, Joe was mostly seen during holiday parties; but by that time we had moved from the three small plants to international, so nobody really expected to see him as much as they had Mike; though most of the old timers would bring it up every so often.

Ostrow, I would see all the time... but that was mostly the interaction between engineering and quality control. Varnell only occasionally as I had to review the quality of some new processing changes that would come about under his tenure. He would usually come to me with Steve.

Not really sure who Dick M. is...
We had several Richard's that worked for us over the years... and I doubt it could be Dick McDonald. I don't remember him being with the company in 2002.

Originally Posted by C-Bass (Post 389829)

If the reason for selling is not for money or health reasons, you may consider letting the next generation take over the responsibilities for the property if they are willing. For the most part the next generation will never be able to afford to own waterfront. The bar is set far too high for middle/higher income earners to ever be able to afford to live on the water. The people who can afford waterfront right now are the very wealthy and everyone else is shut out.

Originally Posted by retired (Post 390736)

Since the property is owned jointly, the surviving spouse gets a stepped up basis for only half of the value. He/she should consider living in it as their primary home long enough to get the $250,000 exclusion on the gain. If they plan on keeping it until death and passing it on to the kids, then they will get a full step up in basis.

Originally Posted by jeffk (Post 390741)

As I previously noted, IF you are living in a COMMUNITY PROPERTY STATE, like NH, then it is likely the surviving spouse will get a FULL stepped up basis because the ownership in such a state is considered to be 100% BY EACH SPOUSE.

There may some nuances, such as when the property was purchased, etc. Therefore, as mentioned by many, if you want a definitive answer FOR YOUR SITUATION, CONTACT AN ATTORNEY in the state where you live. If the property is owned in a different state than where you live, you might want to talk to an attorney in the state where the property is as well.