TAX LAWTAX LAW
From David A. Handler of Kirkland & Ellis LLP, we have this update: Basis of Real Estate Acquired from Exercise of Option Stepped-Up. The will of a taxpayer's mother provided the taxpayer with an option to purchase the mother's house for a stated price an option the taxpayer exercised. Relying on Rev. Rul. 67-96, 1967-1 C.B. 195, the Internal Revenue Service concluded in Private Letter Ruling 200340019
November 1, 2003
Rorie M. Sherman Editor in Chief
From David A. Handler of Kirkland & Ellis LLP, we have this update:
Basis of Real Estate Acquired from Exercise of Option Stepped-Up. The will of a taxpayer's mother provided the taxpayer with an option to purchase the mother's house for a stated price — an option the taxpayer exercised. Relying on Rev. Rul. 67-96, 1967-1 C.B. 195, the Internal Revenue Service concluded in Private Letter Ruling 200340019 (decided June 25 but released Oct. 3) that the option created under the will acquired a basis under Internal Revenue Code Section 1014 that was equal to the value of the house for estate-tax purposes, minus the option exercise price. In addition, the basis of the option is added to the option exercise price...
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