Don’t confuse ‘stepped-up basis’ with property tax basis

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DEAR BOB: I read your recent item about property "stepped-up basis" with great interest, but I wish you had taken it further. Suppose an owner deeds you a house purchased for $100,000, which is now worth $300,000, and you live in it the rest of your life. Won't you be paying taxes on $100,000 and be way ahead of the game? --Martin A. DEAR MARTIN: You seem to be confusing apples with oranges. "Stepped-up basis" to market value refers only to the adjusted-cost basis for inherited property. In other words, the owner died and you inherited the property. Stepped-up basis is very important when the heir decides to sell the inherited property. Purchase Bob Bruss reports online. For example, if your basis for a property is $100,000, but it is worth $300,000 on the date of your death, your heir's stepped-up basis is $300,000. When the heir sells that property, his taxable capital gain is only the amount exceeding $300,000. This is a huge tax savings over a lifetime gift. Instead, if you give t...