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@Lonestar wrote:
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;
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
Two comments:
Do be careful drawing conclusions from reading a publication or specific code section or regulation. Yes, it is super helpful to do that and see what they say. Especially to inform yourself before hiring a lawyer. However, you don't have the experience to know if that particular section applies in your situation or whether there is an exception hiding five sections away. That is why it is a very good idea to get professional advice from someone who does know the bigger picture of the statutory scheme.
As I think @ColeenD3 wrote earlier the examples seem to be about consideration at the time of purchase not a gift sometime later. That could mean the examples don't apply in your situation. Or they could apply. But making that judgement requires understanding more than those sections in isolation.
Re: talking to the IRS. Don't bother. First they are so swamped you can't actually reach anyone. Secondly even if you did reach someone it is unlikely they would really know the answer. Finally even if they were to tell you an answer you cannot count on that to be correct. the basic legal principle of "administrative estoppel" is that an agency cannot change the law by giving an incorrect answer. The law is what it is. The best you can do is perhaps to avoid a penalty because relying on the answer from the agency was relying on reasonable advice.
To answer your question how much of the house basis will step up.
As the property was held as JT each of you had an equal basis in the property. When your father passed away his basis was increased to 50% of the fair market value (FMV) on the date of his passing. For example, if you purchased the property for $100000 then your basis would be $50000 each. If the FMV at the time of your father's passing was $150000 his basis would be increased to $75000. @jtax
Thanks @jtax quite good advice. I will leave it at that for now. Will circle back when I have a firm, proper answer.
@LeonardS there are two questions in this one thread (one from 2.5 yrs ago and one current). FWITW those are the facts of the older question. The newer question involved a deed for half of the house without consideration from the donee.
Looking forward to your answer. Father added me as JTWROS in 2019 to his property purchased on 2011. He passed and I sold prop. Trying to figure stepped up basis very confusing. 1 CPA has returned my call and wants 200 an hour. Do I even want a CPA or need tax attorney?
CORRECTED... My answer was based on the original Subject which I co-mingled with @Stumbles question. My apologies... I concur with @tagteam on @Stumbles specific issue, so am modifying my comments.
Well, I talked to both a CPA ($100 and worth it!) and a tax lawyer (free 1/2 hr consult through a service my company provides) and both gave me the same guidance. (thank goodness)
You can find some good info in IRS Pub 551 (Basis Other Than Cos/Inherited Property/Property Held by Surviving Tenant and in 26 CFR 20.2040-1 (b) and (c). You have to pick from (c) 1-8 to find your specific situation to see what it says.
The bottom line from the hours of research I did, is that the step-up in basis based on the percentage that the decedent invested in the property, because that is what is passed on to their estate. If it was 100%, then 100% of the FMV gets attributed to the estate for the step-up adjustment.
That is my understanding. 🙂 I'm no professional. If the proceeds from the sale appear to be significant, it may be well worth the cost of a professional to get proper direction for your situation. It shouldn't take but 15 mins anyway. Just get all your facts bullet pointed and fire them off. Any CPA worth $200/hr should be able to answer pretty quickly even on a phone call. But as @tagteam indicates, you should get the full step up in basis. This also aligns with what I was told by the CPA and tax lawyer.
@Stumbles wrote:
Do I even want a CPA or need tax attorney?
No, you probably do not need to engage a tax accountant or tax attorney because this scenario is rather straightforward.
Since your father furnished the entire purchase price of the jointly held (JTWROS) property, the entire value is included in his gross estate. As a result, your basis in the property is stepped up to its full fair market value as of the date of death of your father.
As an addendum, I think it should be noted that the posts in this thread predominantly address the scenario in which the property interest is held as joint tenants with rights of survivorship and not as tenants in common.
Thank you.
So 200 an hour is standard. That’s what I was quoted but it’s scary. Are they going to answer my question or say we will research and get back to you.
no mention of condo was made when will was probated and my brother the executer did not file estate tax return. Technically still part of estate.
if condo was gifted there is no stepped up basis.
jtwros can not will their part of property to anyone, it automatically passes to survivors so I’m not clear on how it is even part of estate.
JTWROS with descendent still a joint owner is not a gift. Full stepped up basis to FMV at time of death.
inherit by will, full stepped up basis to FMV at time of death.
all 3 situations basically the same but if gifted you pay more tax. I don’t see how this makes sense.
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