| A tax basis question…read on:
READER QUESTION:
Good morning Mr. Davidow – I just love the Listen to Lawrence questions and answers; I always learn so much! Was wondering if a conveyance from a parent to a caregiver child (for Medicaid purposes) enjoys a step up in basis. As always, many thanks for your guidance.
MY RESPONSE:
The answer is NO!
If you buy a stock for $1, your basis is a dollar. Assume the stock is now $10. IF sold, the capital gain would be $9. If you give the stock to a caregiver child, then the basis of the stock in the hands of the caregiver child is $1. If you give the stock to ANYONE, their basis will be $1. This is called carry-over tax basis.
However, if someone (like your caregiver child) inherits the stock, then they will receive a step up in tax basis to the date of death, in this case, say $10. If the stock is then sold for $10, the capital gain would be zero.
You get a step up in tax basis when you die with stock or a house or other appreciated assets in your name, or in a life estate, or in a revocable trust, or in an irrevocable Medicaid trust.
But the answer to your question above remains no. No step up in tax basis if you simply put your asset in their name, for whatever reason.
I hope this helps. |
