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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4174
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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This is a tax questions. My understanding is that in Oregon

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This is a tax questions. My understanding is that in Oregon only the deceased spouse will receive a new basis on that spouse's share of the assets. Is there a way of holding property jointly in Oregon so that the all of the joint assets get a new basis as in Washington which is a community property state? If not wouldn't it be good to transfer all the assets to the dying spouse? That way all the assets would get a new basis and the sale shortly after death would be tax free?
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Lane :

Hi,

Lane :

No,. you are correct joint tenancy means that each person has their own basis in the property

Lane :

so that when one person passes (when there are two joint tenants) only 1/2 of the basis is stepped up

Lane :

Further your instincts are good, the only way that the entire basis is stepped-up is for that asset to pass through inheritance (100% of the asset)

Lane :

so having one person own everything possible INDIVIDUALLY will maximize ... If I own it all and pass away, everything passes to the heirs in a stepped up fashion ... If the other spouse passes first, then my assets will STILL get a step-up when I pass ... to any remaining heirs (children?)

Customer:

It seems like the only downside would be if the property was all transferred to the "sick" spouse and then if the "healthy" spouse passed away first by mistake and then there would be no step up in basis at all.

Customer:

Of course there would eventually be a step up when the spouse owning the property died.

Lane :

You have it .. very close... the next problem comes in how the transfer is done ... To Gift, means to transfer with a "carryover basis." meaning, if we buy something jointly and then I retitle my 1/2 to you, you still have that original basis. It's only at death (or though a purchase) that the basis changes

Customer:

The sick spouse has cancer that has spread throughout his body and death is probably only months away. Can they just go to a court house or title company to have the property transferred. It seems like the healthy spouse just needs to gift the property to sick spouse.

Lane :

For land, do a quit claim deed (as long as you're sure about a clear title)

Lane :

But DO understand that it's possible REMOTELY in my opinion, that IRS could say you were doing it to evade

Lane :

IN some states the gift has to be there for three year (FOR estate tax purposes) ... the different here is that the benefit of the step us isn't seen until the surviving sopuse eventually sells

Customer:

I've been a CPA forever so I understand how the basis is handled, but it is Oregon that I am not sure about. Also not being an attorney I am not so clear about the transfer of property. Would they need to go to an attorney to do the quit claim deed? Would they need to involve the bank if there is a mortgage? I need to find out if there is a mortgage involved.

Lane :

AND if it continues to pass through inheritance (as you said) probably won't matter anyway

Lane :

For the quit claim deed, no (just get a copy - you can find them online, sometimes the clerk of cour will have them and take it to the courthouse and have them register it

Lane :

You really only need warranty deeds when the person conveying the property is guaranteeing (warrantying) that the titl is free of encumbrances

Lane :

If you use a service such as rocketlawyer or even for a little more money Legal zoom they will provide the right form for your state and have an instruction letter about required signatiures, whether a notary is needed, etc

Customer:

The IRS could say avoid, but not evade:) People give things away at very near to death all the time, but the problem is that those gifts get added back into the estate for estate tax purposes at the value at the date of the gift so those last minute gifts don't really help much for estate tax purposes. I don't think that I have ever heard of the IRS questioning last minute transfers for the purpose of income tax avoidance as long as it is truly a completed gift.

Lane :

right

Lane :

evade mean intentional (mens rae)

Lane :

But yes, I have not seen it questioned ... however, I wouldn't go out and sett it right away

Customer:

So, all in all, are you agreeing that I should advise this couple, who unfortunately are related to me that transfer of this property to the sick spouse would probably be a good idea? The gain on the property would be in the area of 120,000 so it could save around 12,000. over selling without the transfer. There is actually no urgency to sell the property. It is one of those issues where sick husband wants to make things easier for wife by relieving her of the burden of the rentals.

Customer:

I should have added that this couple will not have any estate tax issues for state or federal purposes. Is this site going to allow me to printout our conversation?

Lane :

Yes, it makes sense ... again, if you believe that IRS truly understands substance over form, they COULD re-characterize if the benefit manifested fairly quickly. But therein lies the rationale ... worst that would reasonably happen is they take away add back 1/2 of the gain... and myintuition says that won't happen

Lane :

Good, no red flags

Lane :

YEs, just choose "file-Priont" from the browser ... However, once you rate you can always go back and view from your home page ... you can also bookmark (save as a favorite) and finally here's the link if you want to paste this into a word document http://www.justanswer.com/tax/82w1z-tax-questions-understanding-oregon.html

Lane :

sorry for the typos "...File-Print"

Customer:

Strangely enough in all of the years I have been in audits, the IRS has never really been interested in basis except in estate tax audits. So we are probably OK. You've been a great help in confirming my thoughts. I work in Washington and I am licensed in Oregon also, but I don't do a lot of estate work there.

Lane :

Your welcome, yes, working with someone that understand makes this fun ... (don't always get that here) ... but yes, other than the community property difference everything else is the same

Customer:

Thanks for your time. You have provided excellent service. I always enjoy talking to attorneys.

Lane :

You're welcome ... by the way, I'm third year law, a CFP and MBA with tax specialization, but NOT an attorney .. I would submit to you, however, that a CFP knows a whole lot more about estate planning the minute he gets out of the exam than an attorney who just passed the bar

Lane :

sitting for the GA bar in february and DID have a fukk year of both estate, wills & trusts AND Federal taxation as electives (more than the typical law graduate)

Lane :

But again, this one isn't rocket science

Lane :

Have also been providing tax advice and completing trust, individual, estate and business returns since 1976

Lane :

Hope that helps

Customer:

Yes, it's true many attorneys don't know much about taxes or estate planning which is fine if they realize it. I remember the old days when a CPA thought they were a financial planner. I figured out years ago that there was someone else who could do that so I don't do financial planning except in the smallest way. Estate planning and tax planning I enjoy. Good luck and thanks.

Lane :

YW, you too ... enjoyed it

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

Lane

Customer:

I gave you excellent. Thanks!

Lane :

Thanks much! Hope to talk to you again here ....


If you'd like to work with ME again just say "For Lane only," at the beginning of your next question.


 


OR you can also add me as your preferred expert on your home page if you'd like.


 


Regardless, thanks again for the feedback!


 


Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4174
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 7 other Tax Specialists are ready to help you
Expert:  Lane replied 11 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 11 months ago.

Hi, just moved us to the Q&A mode, so you'd have another way to get back to me... I think this may also make it a little easier to see the whole conversation.

Thanks
Lane

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