tomch...[at]gwi.net wrote:

- quote -

To claim the $500,000 exclusion when filing MFJ you must be
married AND file a joint return. As of Dec 31 of the tax
year the widow is not married. She can claim her own
$250,000 exclusion and benefits by the increase in basis for
the portion of the home she inherited.

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tomch...[at]gwi.net wrote:

- quote -

Who is WE? If the house was sold in 2006 and the surviving
spouse files a Married Filing Joint return (with the
decedent), the full $500,000 exclusion can be claimed. If
the widow remarried in 2006, she is limited to a $250,000
exclusion and the decedent's exclusion is lost (cannot be
claimed on his final return). Unless she lives in a
community-property state, the basis adjustment is limited to
the decendent's half of the house. The widow's half does not
change.

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<tomchand[at]gwi.net> wrote:

- quote -

If the home is sold in the year of death, you get both: the
step-up in value of 50% (100% in CP states) and the full
$500K gain exclusion. If sold in a subsequent year, the
exclusion drops to $250K.

Ira

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- quote -

Assuming the widow is filing a joint return with her
deceased husband and that the sale was finalized in 2006,
she is entitled to exclude up to $500,000 of profit.

It sounds like you're familiar with the applicable basis
step-up rules, but just to cover all the bases, if the
spouses were domiciled in a community property state and had
designated their joint interest as community property, the
surviving widow gets the basis stepped up to the full fair
market value (FMV) on the date of her husband's death.

http://www.irs.gov/pub/irs-pdf/p555.pdf

Frederick Lorca

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tomch...[at]gwi.net wrote:

- quote -

At least. Depending on the ownership form there may be a
100% step up.

- quote -

If it's a joint return and one of the couple meet the
ownership test and both meet the primary residence test then
the exclusion is $500,000.

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Taxpayer passes away in the spring of 2006. Taxpayer's widow
sells their long-time home with diddly basis (meets
requirements) for $575,000.

I assume we can probably take the step up in basis on 1/2
the value (taxpayer's portion) of the home.

For 2006 we will be filing joint - if we take the step up in
basis is the exclusion $250,000 (widow's portion) or is the
exclusion $500,000 for married filing joint?

Do we get the benefit of the step up AND the decedents's
exclusion?

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