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step up basis, goodwill, sole proprietorship, suriviving spouse

 
 
bm30003700@aol.com
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      05-13-2005, 06:37 AM
a few years ago there was a court case that determined that
a person inheriting a sole propertorship from their decedent
spouse in a community property state only received a step up
of one half of the goodwill value in the business, even
though the remaining assets were received with step up of
full value.

has this changed?

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Stuart A. Bronstein
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      05-15-2005, 11:09 PM
"(E-Mail Removed)" <(E-Mail Removed)> wrote:

> a few years ago there was a court case that determined that
> a person inheriting a sole propertorship from their decedent
> spouse in a community property state only received a step up
> of one half of the goodwill value in the business, even
> though the remaining assets were received with step up of
> full value.
>
> has this changed?


I don't remember seeing any case like that. Doesn't make
sense to me.

If the business was community property and half included in
the decedent's estate for estate tax purposes, it should
receive a stepped up basis on the whole thing under section
1014(b)(6).

On the other hand, if it was separate property of the
deceased spouse, the entire value should receive a stepped
up basis under section 1014(a).

Stu

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Rick Merrill
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      05-16-2005, 05:26 AM
(E-Mail Removed) wrote:

> a few years ago there was a court case that determined that
> a person inheriting a sole propertorship from their decedent
> spouse in a community property state only received a step up
> of one half of the goodwill value in the business, even
> though the remaining assets were received with step up of
> full value.


The "goodwill value" is an intangible. The rule sounds
pretty reasonable, but you should have an accountant handle
that. If the 'goodwill' was just a small part of the total
valuation, that would be very different than if the goodwill
were half the total valuation.

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