Members of the Maryland Association of Certified Public...

Tax answers

April 11, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: If a married couple jointly own stock and other securities and one spouse dies, is the basis for this stock the price they paid for it originally, or does half of it get revalued at the value of the securities on the date of death of the spouse? What happens to jointly owned real estate?

A: For the surviving spouse of a married couple who jointly owned stock (termed "a qualified joint interest"), the basis in the stock is one-half of the cost of the stock. The basis is increased by the cost of the half inherited, generally the stock's fair market value at the deceased's date of death, or at an alternate valuation date. Real estate owned under a "qualified joint interest" is treated in the same manner, with an adjustment made for depreciation claimed or allowed previously. (Note: if the property was acquired prior to 1977, the old tests apply.)

Q: My house was bought some years ago for $5,000. It was destroyed by fire and rebuilt with insurance for $55,000. The house is appraised for $80,000. If sold at that price, what would the capital gains base be for tax purposes?

A: The basis of the house is its purchase price, $5,000. The cost to restore the house to its condition before the fire ($55,000) is added to the basis; however, the basis is reduce by the amount of any insurance reimbursements received for the casualty (assumed to be $55,000 in your case). So, if the house sells for $80,000 and no other adjustments are made, the gain is $75,000 ($80,000, less the original $5,000 price).

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

Pub Date: 4/11/96

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