I have the following questions on stepped-up basis and depreciation on Community rental property in California on death of spouse. Both H & W filing MFJ as California Residents.
- Husband died in March 2023. For 2023 MFJ tax return, how should the surviving wife report the stepped-up basis of the rental prop held in both H & W names as community property? Does she report 100% fair market value as of the date of death on the 2023 tax returns?
- On form 4562, how is the stepped-up basis reported and the Depreciation calculated? Is it calculated from March 2023 to Dec 2023 based on the FMV or is it calculated for the full 2023 year on FMV over the 27.5 years asset life?
- Where to note on form 4562 that the depreciation is now on a stepped-up basis?
- What will happen to the depreciation deducted in prior years when H was alive?
- The wife sold the rental property in May 2024. How will she recapture the depreciation in 2024 that she would have taken in 2023 on the stepped-up FMV basis?
