Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000? fair market value of $6 million) and personal property (adjusted basis of $390,000? fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye's basis in the property after Neal's death?
A) $800,000 real estate and $295,000 personal property.
B) $800,000 real estate and $390,000 personal property.
C) $3,400,000 real estate and $295,000 personal property.
D) $6,000,000 real estate and $295,000 personal property.
E) None of the above.

Question

Quizplus · Accepted Answer

In a community property state, when one spouse dies, the entire property gets a step-up in basis to the fair market value at the date of death. Therefore, Faye's basis in the real estate is $6,000,000, and the personal property remains at its fair market value of $295,000.

Neal and His Wife Faye Reside in Texas, a Community