Liam and Isla are husband and wife and have always lived in a community property state.At the time of Isla's prior death,part of their community property includes: Under Isla's will,all of her property passes to Liam.After Isla's death,Liam's income tax basis in this property is:

Question

Liam and Isla are husband and wife and have always lived in a community property state.At the time of Isla's prior death,part of their community property includes:  Under Isla's will,all of her property passes to Liam.After Isla's death,Liam's income tax basis in this property is:

Quizplus · Accepted Answer

In a community property state, the entire community property receives a stepped-up basis to fair market value upon the death of the first spouse. Therefore, Isla's half of the property receives a stepped-up basis to $7,000,000 upon her death, and upon her husband's subsequent inheritance of the property, his income tax basis would also be $7,000,000.

Liam and Isla Are Husband and Wife and Have Always