“Under 26 U.S.C. § 2036(a)(1), the gross estate includes certain property. This is property the decedent transferred ‘by trust or otherwise’ while keeping ‘the possession or enjoyment of, or the right to the income from, the property’ for life. Section 1014 then treats property ‘required to be included in determining the value of the decedent’s gross estate’ as acquired from the decedent under § 1014(b)(9). Under § 1014(a)(1), the basis becomes ‘the fair market value of the property at the date of the decedent’s death.’ IRS Publication 523 applies the same rule to inherited homes and points readers to section 1014.
“Including the house in the estate rarely triggers estate tax for a typical family. The basic exclusion amount is $15,000,000 under § 2010(c)(3)(A), set by recent legislation, with inflation adjustments starting for deaths in calendar years after 2026.
(. . .)
“Trusts where the parent kept no interest at all are not subject to the rule. In Revenue Ruling 2023-2, issued March 30, 2023, the IRS concluded that completed gifts to an irrevocable grantor trust that stay out of the gross estate get no step-up at death. The children then inherit the parent’s original basis.”
(continued)
● “They Moved the House Into a Medicaid Trust in 2017 and Everyone Told Them the Kids Would Lose the Step-Up. When Mom Dies and the Kids Sell, the IRS’s Share of 38 Years of Gain Will Be $0,” 24/7 Wall Street, 10/22/26:
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