Category: Deductions & Credits; Estates & Trusts Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com The taxpayer inherited income-producing depreciable real estate from a decedent. Accordingly, the taxpayer's basis in the property was stepped up to its fair market value at the date of the decedent's death under IRC Section 1014. How is the step-up in basis treated for depreciation purposes. The property in question was acquired by the decedent prior to 1981? Clearly the property (or the portion thereof) acquired from the decedent is treated as an acquisition of the property. The question is whether the decedent's depreciable life and method carry over to the taxpayer who inherits the property. As a general proposition, an acquiring taxpayer applies MACRS rules based on the taxpayer's time of acquisition. It seems to me that unless the anti-churning rules apply, the stepped-up portion of inherited property should be treated as a new MACRS purchase. It is clear that the MACRS anti-churning rules do not apply to property acquire from a decedent. See IRC Code Sec. 168(f)(5)(A); Code Sec. 168(e)(4)(H) before amend by Sec. 201(a), PL 99-514, 10/22/86; and S Rept No. 97-592 (PL 97-448) p. 6. Conclusion: Any property or portion thereof acquired by inheritance from a decedent is treated as an acquisition of the property as of the date of the inheritance and subject to the normal MACRS rules as to available recovery periods and methods.
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