Question:
My question is concerning stepped up value for an inheritance from a CCRC – Continuing Care Residential Community. The buy-in was $375,000 after death the return is 90%. Is the loss of 10% deductible as capital gain loss? Further can you use a step-up to the current buy-in to claim as a capital loss on tax return?
Response:
No. The CCRC payment is not an investment. It’s simply a deposit that’s held by the facility. The payment of 90% of the buy-in amount is under contract, not a loss in the value of the asset. Neither the resident nor heirs will have any tax benefits nor payments as the result of the transaction.
The deposit will be in the resident’s estate for estate tax purposes, but that’s irrelevant for almost everyone with the federal estate tax threshold now (2022) at just over $12 million. Some states do have estate taxes with lower thresholds, as low as $1 million in Massachusetts and Oregon.
