Legal Question in Wills and Trusts in New Jersey

Inheritance a coporation

My father passed away recently and was the sole owner of a corporation that has no assets except for a 2 family house that was in the corporation name/owned by the corporation.

The property has apparently been fully depreciated over the years...all the allowable deductions were used? I'm not sure what this means.

As the heir of the estate, I inherited the corporation. Does the value of the property get stepped up to the current market value, resulting in no corporate gains tax owed at the time of the sale of the property or sale of the corporation?

Basically I want to sell the house and was told I would owe a corporate gains tax because the house was in the corporation name and not my fathers.


Asked on 10/18/07, 9:51 pm

1 Answer from Attorneys
Ronald Cappuccio Ronald J. Cappuccio, J.D., LL.M.(Tax)

Re: Inheritance a coporation

You will get a step-up in the basis of the stock in the corporation. The corporation does not get a stepped-up basis in the house. This means if the corporation is a C corporation (filed a US 1120) the corporation will recognized gain on the sale of the house but you will not recognize gain when you are paid a corporate distribution liquidating the corporation. In the other hand, if the corporation has an "S" election (files a US 1120S) then there should be little Federal Tax.

I hope this helps!

Ron Cappuccio

http://www.taxesq.com

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Answered on 10/18/07, 10:01 pm


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