Does this apply for inherited rental property from one spouse to another?
It depends on a number of factors. Did the couple (prior to the passing of one of them) live in a community property state? Were they both listed on the deed as JTWROS?
My CPA said: "Generally speaking the "depreciable" basis does not change due to step up due to inheritance." This seems wrong.
That statement standing by itself is flat out wrong, and I'm confident your CPA would agree with me on that. So there's other factors here that you didn't mention, the CPA didn't tell you, or (more than likely) you don't remember the CPA telling you.
We sold 2 of the 3 rental homes in 2018 and used the date of death FMV cost basis in the 2018 returns reporting the sales of those houses. I'm reviewing the depreciation, and this CPA did NOT use the new cost basis for the remaining house.
Depending on the state, if the property was owned by both as JTWROS, then when one passes the cost basis does not change and they don't get a step-up in basis. This scenario is *NOT* common, but not impossible either.
Because this scenario is so uncommon, I think it might be worth while in your case to seek the advice of another tax professional, and make sure it's one that doesn't know your present CPA either. (They tend to work together, like a pack of wolves sometimes.)
