Home Sale-California-After Death of Spouse

[senior1700]

Scenario: For ease, here are simple facts. Home purchased by married spouses in California in 1997 for 500,000 (community property). One spouse died in 2019 and FMV of home (based on appraisal) was $1,000,000. Surviving spouse sells home in 2023.

Publication 523 states that when either spouse dies in CP state, "the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse."

For purposes of reporting sale of home: Is $1,000,000, then, the number to input into the "original cost" (which is the term used by Turbo Tax in the "Adjusted Cost EasyGuide"?

Or does the info belong on the page referring to "the description and amount of any other items that increased the cost of your home" such as receiving part (or all) of the home through inheritance or divorce?

The result is the same - just trying to put the stepped up basis info in the correct place.

Thanks.

[DianeW777]

Yes, in California (CA) the living spouse does receive a step up in cost basis to the fair market value (FMV) on the date of death of their deceased spouse.

However, Joint tenancy has special rules that CA residents should know. If you hold a home in joint tenancy with your spouse, the surviving spouse retains the original cost basis on 50% of the home and 50% inherited FMV instead of getting a step-up in basis on the entire home.

For the federal return, community property laws also affect your basis in property you inherit from a married person who lived in a community property state. See Death of spouse , later.  See IRS Publication 555.

Yes, the cost basis for the sale of the home to the living spouse would be $1M in your example, if you qualify. You only need to enter that amount, not any of the other line items since this covers everything at the date of death.