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Meanwhile... given the niece was recently widowed, it brings to my mind the question of a marital transfer at death. How does that play out in the step-up rules? Does it make any difference how the properties were titled at the time of the spouse's death?

If she inherited these from her late husband, how the properties were titled will make a huge difference.

Any of the properties that were here separate property get no step up in basis at all.

I'm pretty sure Hawaii is not a community property state, so any property that she owned jointly with her late husband will get 1/2 of the property stepped up to current FMV.

And if any of the properties were his separate property, they will get a full step up in value.

--Peter
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