Question

Mimi and John are married and have always lived in a comμnity property state. They purchased the home 25 years ago for $140,000. After many improvements and a surge in the market, the home is now worth $500,000. John and Mimi both have wills leaving their entire estates to their daughter, Bette. What would Mimi's basis in the home be if John died today?

a) $140,000
b) $250,000
c) $375,000
d) $500,000

Answer 1

Mimi's basis in the home after John's death, in a community property state, would be stepped up to the current market value, which is $500,000.

Step-by-step explanation:

If Mimi and John live in a community property state and John passes away, Mimi's basis in the home would typically be stepped up to the fair market value at the date of John's death. Since the house is now worth $500,000, Mimi's new basis in the house would generally be $500,000. This is because in a community property state, the entire property is considered to be owned jointly regardless of which spouse purchased it, allowing for a step-up in basis to the current market value for the surviving spouse.

Therefore, the correct answer to the question about Mimi's basis in the home if John died today is d) $500,000.