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Any chance that only 1/2 of the house received a stepped-up basis? I am unsure what the original poster meant by "changed the deed on her home", but if grandmother executed a deed to one-half the house to her daughter [original poster's mother], might that not be considered a completed gift, at grandmother's basis, and therefore not part of the estate? Or would the fact that it was done less than three years before death and not for reasonably equivalent value (or fair market value, or insert appropriate terminology) mean that it was ignored and entire house was considered part of her estate for FET purposes and therefore entitled to step-up in basis?

Somehow the thoughts in my head on this issue didn't make it through to the fingers. I agree with you that I'm unsure about the purpose behind changing the deed.

If it were simply a part of an overly simplified estate planning technique - a way of getting the home to the intended heir(s) - then I would think the whole property would get a step up in basis.

If, on the other hand, it was intended as bona fide transfer of a part interest, then the step up would not apply. Except, of course, that the giver passed away less than three years after the gift was made, so the gift gets included in the estate at date of death value (rather than at the value at the time of transfer) and the whole property again gets a step up.

A rather messy way of saying that I think the whole property will get a step up in basis no matter what the intent was behind the change in title to the property.


Under most state law the titling of fractional interests represents a completed gift and the federal treatment follows. As well, outright transfers of real estate interests are generally not subject to the three year inclusion rule for estate tax purposes.


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