Surviving spouse's depletion on community property for year of deceased spouse's death.

• Author: Harrell, Madlyn M.
• Position: Brief Article

Under Sec. 1014(b)(6), the basis of a surviving spouse's 50% share of community property generally is stepped up or down to its fair market value at the deceased spouse's date of death.

Rev. Rul. 92-37 explained how to calculate a surviving spouse's oil and gas cost depletion for her 50% share of community oil and gas property for the year of the deceased spouse's death. This ruling concluded that depletion on the survivor's share of the property for the whole year, including the portion preceding the decedent's death, should be based on the estate tax value of the entire property pursuant to Sec. 1014.

The ruling provided an example of a married couple, D and S, who lived in a community property state. The community property included oil and gas working interests and royalty interests, which did not qualify for percentage depletion. D died Mar. 18, 1989. A joint return was filed for 1989, covering D's shor tax year ending Mar. 18, 1989 and S's full tax year ending Dec. 31, 1989.

This ruling pointed out that Regs. Sec. 1.611-2(a)(1) requires depletion for a tax year to be computed after the property's adjusted basis is...