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This may or may not be a fine point since your wife died too. If you are not living in a common property state (Nebraska doesn't seem to be), it seems likely you would receive a stepped up cost basis yourself. But if you were living in a common property state, once the property passed to your wife you may have become a co-owner - giving you a 50% ownership at your wife's cost basis. However the common property state may also exclude inheritances ... meaning this might not be a straight-forward issue.

But since Nebraska doesn't appear to be a common property state, I *think* none of that is an issue for you.

I think you mean 'community property' not 'common property'.

That said, in community property states, gifts and inheritances generally remain the sole and separate property of the beneficiary, unless the beneficiary chooses to give the property to the marriage community, such as by moving it to a joint account, or adding the spouse's name to the account's title. Since the property wasn't even received until after the wife's death, presumably, this choice was not made. Therefore, even though, IIRC, MCCrockett lives in California (a community property state), he would not have had any ownership or basis in this account.

And even if the property had been given to the marriage community, all of the community property generally gets a step up in basis to the fair market value upon the death of one of the spouses. From IRS Pub 551

Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), married individuals are each usually considered to own half the community property. When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property.

So, in either case, the basis would be the value as of the wife's death, or an alternate valuation date (as explained in my previous post).

Hopefully someone will correct me if I'm wrong...


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