What is my cost for determining future gain or loss on the sale of property?

The basic rule for determining the gain or loss on the sale of property is Sales Price minus selling expenses minus Adjusted Basis (the technical term for most of us refer to as Cost). When we sell an asset we purchased, the Adjusted Basis is our cost of the asset. When we receive an asset as a gift, the Adjusted Basis is usually the Adjusted Basis in the hands of the person who made the gift (there are exceptions to this rule).  When we inherit a property, the Adjusted Basis is normally the fair market value of the property at the time of death (again there are exceptions to this rule).

There are new rules and forms that require the executor of an estate to report the Adjusted Basis of assets that pass through an estate to those who inherit the assets. The Adjusted Basis is still the fair market value at death, even if the filing of an Estate Tax Return (and therefore the reporting of Adjusted Basis) is not required.

There is an exception to the basic rule, however, where a non-US person has a US Estate. Often times the amount of US assets is such that a US Estate Tax Return is not required.  It this situation, the new Adjusted Basis of fair market value at date of death only applies if a US Estate Tax Return is filed.  Not filing the Estate Tax Return because it is not required to be filed will result in the Adjusted Basis of those inherited US assets to be Zero.

Contact one of our dedicated professionals for a consultation to assist you with your tax planning needs.

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