@jtax Thanks for all your responses! Sorry, very busy day yesterday. And thanks for everyone's patience with this.
1) As for the 'future' situation, it has already been decided as to the JT situation for another piece of property, it's just not time to sell it yet. But, yes, I understand that there are better ways to do it than making someone a JT.
2) I do believe the 'gift' was intended to be at that point in time. I don't think the aunt was anticipating the future ramifications of the creation of the JT, but was doing it for reasons I won't get into on this forum. Had she known about potential taxation issues, she may have considered another method.
There is no challenge from the IRS, as the return has not been submitted yet. I'd like to do it correctly the first time and have my ducks in a row in case there is a challenge. Thanks for referring to an Estate Attorney. I did use one for some things while settling the estate so I could circle back with them, if they have specific knowledge on this type of topic.
3) Lastly, funny you mention the Codes on this topic. I had prepared a great response to @ColeenD3 and tried to post it but got dinged for post flooding since it had not been 60 mins since my last post. Later, it had all disappeared! I was pointing to those Codes and seemed to have substantiated my claim that 100% of the FMV should be used... refer to 20.2040-1 Joint interests; (b) Meaning of “property held jointly”;
(c) Examples. The application of this section may be explained in the following examples in each of which it is assumed that the other joint owner or owners survived the decedent:
(1) If the decedent furnished the entire purchase price of the jointly held property, the value of the entire property is included in his gross estate;
(2) If the decedent furnished a part only of the purchase price, only a corresponding portion of the value of the property is so included;
BTW, there appears to be no need for an Estate Tax Return at this point, so where referenced in CFRs it's not relevant.
And once again:
From IRS Pub 550, Page 10 – (Depreciation is irrelevant – my note)
If Jim hadn't contributed any part of the purchase price, his basis at the date of John's death would be $54,000. This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property.
The figuring of the cost basis seems to hinge on the percentage of contribution of each JT and in our case, there was no contribution by my wife and we would gladly furnish an affidavit to that point.
Then again, to assume that the FMV carries over to the Estate upon death of the sole contributing JT, doesn't necessarily convince me that my preferred application in this tax situation is correct. It may be not have anything do with figuring that tax on selling the house. But, it sure looks like it is supported by Pub 551.
I have the opportunity to get some free legal advice from a tax lawyer, hopefully tomorrow. If that's not enough to get an answer, I'll pursue the estate lawyer route.
Thoughts on talking to the IRS directly? Good or bad idea? LOL
