First, the basis for the children will begin with the same basis as their father's basis at the time of the gift (2019) split between all of the owners which would mean it would be divided by four (three children and father). Next, on the date of death of their father, his share would get a stepped up basis, then that portion would be divided by the three children remaining on the deed.
- Example: Father paid $50,000. In 2019 it is divided by 4 giving each person a cost basis of $12,500. In 2022 the fair market value is $75,000.
- $75,000 divided by 4 = $18,750 which is now the stepped up basis for the father's portion only. $18,750/3 children = $6,250
- $12,500 + $6,250 = $18750 cost basis for each child on the date of death of their father. Or you could just stop at the stepped up value divided by 4 owners immediately preceding death.
The fact that a gift tax return was not done, does not change the outcome of the cost basis for the children. The good news is they get to use the cost basis shown above and not the $1 transfer through the quit claim deed.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
