Can I use a full step up (to my mother's date of death) for a mutual fund that I was a joint tenant of since she was the exclusive contributor to the fund?

[jmjsgoblue0228-]

I have read articles that since my mother was the exclusive contributor to the fund and she has always paid taxes on the capital gains and dividends herself that the cost basis could be fully stepped up to her date of death.  Would I be required to prove this? I have tax statements for several years past to show her paying taxes on the capital gains  I have also read articles that say only 50% can be stepped up because I am a joint tenant.

[jaykoval]

Do you file the tax return yet? If yes, then what basis did you end up going with?

[jaykoval · Accepted solution]

I am researching this question today, and found your post. I believe you get a step-up basis, but I cannot tell you what percentage of the account receives step-up basis. As of this writing, probably either your mother's 50% of the account gets a step-up, or the whole account may get a step-up.

You should consider having a tax professional review your particular situation. If you have filed the return with the incorrect basis, then you want to look at filing an amended return before the deadline to receive any additional refund you may be due because of the step-up basis.

I found this at the California Estate and Elder Law, LLP site:

"If the joint owner who died paid for the entire property, the full value of the property is included in the deceased owner’s estate. The property receives a 100 percent step-up in basis. For example, if Mrs. A owned stock, put it in joint tenancy with her daughter, and subsequently died, the full value of the stock would be included in Mrs. A’s estate. Her daughter would then inherit the property with a 100 percent step-up in basis.

If both joint owners contributed to the value of the asset, the value of the deceased joint owner’s share is included in his or her estate. That portion of the property receives a step-up in basis. If Mrs. A and her daughter bought stock for which Mrs. A paid 60 percent and her daughter paid 40 percent, then 60 percent of the value of the stock would be included in Mrs. A’s estate and would receive a step-up in basis."

[SweetieJean]

Joint tenancy with rights of survivorship accounts enjoy probate-free transfers of ownership.

As a joint owner, you do NOT receive a step-up in cost basis. That means that, when you sell, you will use your mother's cost basis

[TaxGuyBill]

Merely adding a name to an account doesn't necessarily mean the mother gave that money to the other person.  The fact that she was the exclusive contributor, received all dividends, and paid all of the taxes, could easily mean it was an "incomplete gift".  If that is the case, the Basis may get a full Step-Up.  Estate planners often create "intentionally defective trusts" to exploit the full Step-Up Basis for an Incomplete Gift.

This is NOT my area of expertise, and it may depend on State laws, so the OP may want to consult a local Estate expert.