Terrell and Michelle are married and living in New York, which is a not a community property state. They jointly own property with an adjusted basis of $240,000. On December 2 of this year, Michelle died when the property had a fair market value of $260,000. Terrell's basis in the property after Michelle's death is

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In a non-community property state, the surviving spouse receives a step-up in basis only for the deceased spouse's share. Michelle's share is stepped up to $130,000 (half of $260,000), and Terrell's original basis remains $120,000 (half of $240,000), totaling $250,000.

Terrell and Michelle Are Married and Living in New York