When politicians started talking of eliminating the step up in basis I started calculating & more importantly documenting our land basis to make things easier on us and/or future generations.
How does land basis work in these two situation:
1) FIL dies. There's a value placed on his half at date of death. MIL has lifetime use of real estate till her death. When she dies do the inheritors get 1/2 step up in basis from FIL date of death and 1/2 from MIL; or is the basis set at the time of distribution when deeds are handed over following both their deaths?
2) Person A dies and his land goes into a specific Trust that Person B gets lifetime use (titled in Trust's name at courthouse) but ultimately it's supposed to go to persons C, D, E. After a few years Person B decides he doesn't want the Trust proceeds anymore and goes to the court and the Trust is dissolved and distributed. Is the basis set clear back when Person A died or when the actual deeds of distribution go out to persons C, D, E.
I guess my question is - is it on date of death of each party or when the actual deeds of distribution go to the ending party.
If in both cases it's the earlier of the dates of death how does one find the basis that was established at that time? Is it filed in the county courthouse where the land is located or filed in the county where the person died?
I'd think that eliminating the step up in basis or establishing a tax on gain without a sale would be a nightmare for government to track given 1031 exchanges and the other scenarios.