Acquired from the Decedent

By: Martin M. Shenkman, CPA, MBA, JD

Property Must Be "Acquired From" the Decedent to Be Subject to the New Basis Adjustment Rules in 2010 under the optional 2010 carryover basis rules The general rule noted in the preceding section applies to property "acquired from" the decedent. This term must be defined to understand when the new rules will apply. Property acquired by devise (real property received from a decedent), bequest (personal property received from a decedent), or inheritance or by the decedent’s estate from the decedent, will be deemed "acquired from" the decedent. Also included is any other property which passes from the decedent by reason of the decedent's death if passed without consideration (i.e., not paid for by the recipient). This includes property the decedent owned as a joint tenant with the right of survivorship or as a tenant by the entirety. For jointly held property between spouses the property is deemed 1/2 owned by each spouse. This means only 1/2 the value of jointly held property can be stepped up in value by application of basis adjustments or stepped down in value (if the fair market value at the date of death is less than the decedent’s basis, as described below regarding exceptions) if the carryover basis regime is elected. Property transferred by the decedent to certain trusts, will similarly be subject to the carryover basis adjustment rules. Property transferred to a “qualified revocable trust” ("QRT”) will be subject to the new carry over basis rules. Finally any other trust with respect to which the decedent reserved a right to change the beneficial enjoyment of the trust property by exercising a right reserved to the decedent to alter, amend or revoke the trust, will be treated as property “acquired from” the decedent and subject to the new basis adjustment rules. This includes trusts included in the decedent’s estate under Code §§2036(a)(2) or 2038, but trusts included in the estate under Code §2036(a)(1) will not be treated as “acquired from the decedent” even if though the trust is in the decedent’s gross estate.

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