Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in her income tax basis in her half of the community property.

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Upon Brad's death, Heather's income tax basis in her half of the community property will be stepped up (or down) to the fair market value as of the date of Brad's death, which can affect the capital gains tax she might owe if she sells the property. This adjustment applies to community property states like New Mexico.

Brad and Heather Are Husband and Wife and Live in New