Don’t get stuck paying big capital gains

Amend tax return to claim stepped-up basis

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DEAR BOB: We own a rental property that was not properly set up two years ago to "stepped-up basis" when title passed from a deceased spouse to a surviving spouse. Should we amend the tax returns to reflect the higher basis or begin the adjusted cost basis for depreciation purposes in 2006? We are thinking of selling the property. --Rebecca C. DEAR REBECCA: You can amend your income-tax returns for the last three "open" tax years. From your description, I would do so. Purchase Bob Bruss reports online. Especially if you are thinking of selling the property, the stepped-up basis to market value on the date of death will reduce your capital gain. Yes, the higher basis will also increase your depreciation deduction for the last few years and increase the special 25 percent federal depreciation recapture tax when you sell, but that will probably be more than offset by the lower capital gains tax. Ask your tax adviser to explain further. DON'T ALLOW NEIGHBOR'S FENCE TO ENCRO...