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RLWEA
RLWEA, Accountant
Category: Tax
Satisfied Customers: 69
Experience:  I am an Enrolled Agent with the IRS for 25+ years. Thank you for allowing me to assist you!
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I have a client who had a joint tennants stock account with

Customer Question

I have a client who had a joint tennants stock account with his mother. His mother died in Feb of 2007(he is just now filing for 07) he did not put the dividends or cap gains on his mothers return...he will pick it up on his through the 1099 received. Does he get a step up in basis for his portion, or because it was a joint account the basis remain the same.

Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  RLWEA replied 3 years ago.

RLWEA :

Hello are you there?

RLWEA :

Was there a trust or will left by his mother?

Customer:

No. He is the only remaining relative, he is on everything.

RLWEA :

Is the state going to have to file a Form 709?

RLWEA :

estate..sorry

RLWEA :

I am going to take a moment to research on my private tax software...will you wait a moment?

RLWEA :

Yes he will receive a stepped up basis. See the following:


Stepped-up Basis at Death

When a person dies, all assets owned by the decedent are valued at their fair market value, usually by appraisal, by the person (the executor of the will or trustee of the living trust) filing the federal estate tax return. The determination of fair market value is generally made as of the date of death, however, there is an alternative valuation date of 6 months after death available for estates that have decreased in value.


As a corollary to this rule, the tax basis of the decedent's property is "stepped-up" to the estate tax valuation amount. Tax basis refers to the value of the property for computing gain or loss. It is usually the cost of the property plus improvements and less any depreciation.


For example, if the decedent dies owning stock which he or she purchased for $5, but has a current value of $100, the full $100 value is used to determine the estate tax. The stock then receives a stepped-up basis of $100 in the hands of the donee. No income tax will be paid by the donee on the subsequent sale of stock for $100 or less; income tax will only be paid on the sale of stock for an amount in excess of $100 and only for that excess amount.

RLWEA :

Joint tenancy is a method of holding title to property when two or more people own property together, but the last survivor will own the property outright. When a joint tenant dies, his or her interest goes automatically to the survivor; there is no probate and a will or living trust has absolutely no effect on joint tenancy property.


There may be adverse tax consequences to the joint tenant who dies first. There is a presumption that the entire fair market value of the property is part of the decedent's estate for estate tax purposes, unless the surviving joint tenant can prove (through financial records) the amount of his or her share of the payments made towards the purchase, improvement or upkeep of the jointly held property. For instance, if the surviving tenant can prove he or she made a 30 percent contribution towards the purchase, improvement or upkeep of the property, then 70 percent of the property will be included in the deceased tenant's estate for estate tax purposes.

RLWEA :

That is the caveat to my my original answer...

RLWEA :

So you will still need to make sure his Mother's estate was not over a million dollars...do you understand why?

Customer:

Not subject to estate tax and no 1041 filed......not even a final 1040 for the decedent.

Customer:

I would assume the step up in basis, if it was not joint tennants, but since it is, does he only get 50% step up.....

RLWEA, Accountant
Category: Tax
Satisfied Customers: 69
Experience: I am an Enrolled Agent with the IRS for 25+ years. Thank you for allowing me to assist you!
RLWEA and 3 other Tax Specialists are ready to help you

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