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Name:
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GoneFishin
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Subject:
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The Martini Truth Detector has arrived....
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Date:
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6/16/2010 11:59:51 AM
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Most homes are owned jointly. Assuming your wife’s parents owned it jointly, each owed 1/2. Since her dad owned 1/2, her mom inherited his half on a stepped up cost basis. The cost was $10,500 allocated to each of them (1/2 of $21,000) and the market value at time of her dad’s passing for his 50% was $175,000 (1/2 of $350,000). The new cost basis for the 1/2 in her dad’s name was $164,500 ($175,000-$10,500).
Her mom’s new cost basis was $175,000 (her $10,500+$164,500). Based on the sale of the house, her profit for tax purposes was $175,000 ($350,000-her new cost basis of $175,000). Since she was a widow, her exemption from tax would be $250,000 which is greater than the $175,000 so there would be NO tax.
If a tax was paid then you guys need a new accountant.
“So after 2011 almost one quarter of the profit from a home sale goes to pay taxes.” Rather misleading when you use the word profit. Profit AFTER the $250,000 or $500,000 exclusion and any step up basis.
So Martini, as usual, only told part of the story and engaged in conservative fact manipulation.
Cheers.
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