All gift or part inheritance?

wrote

Yup.

Documentation is the only problem.

If it's community property, the whole property got a stepped up basis in 1996.

Stu

OP did not indicate state where property is located. The nuances of community property can vary from state to state, for example in California, there have been numerous legal changes to "Basis of Property Decedent and Surviving Spouse" going back to 1927 or earlier, from what I see in CA Form 1039.

I advise that a property originally purchased by a single man in 1935 be subject to further specialized tax research.

-Mark Bole

I presume you mean dad adds mom to the deed making mom & dad joint owners

You should get the step of in basis for the 1/2 owned by mom at her death.

Documentation is likely your largest hurdle...

dad's original cost basis from purchase closing in 1935 documentation showing transfer of 1/2 interest in property to mom mom's 706 date of death value

___________________________________

-----> real address on hobokeni or hobokenx

Any chance the property transfer from Mom to Dad qualifies as an inter- spousal transfer, with no step up in basis? (Hate to post a dumb question that I could research in a few hours, but I'm curious. The capital gains tax rate at is lower than the gift tax rate, so I thought it might be worth it to look dumb and go ahead and ask.)

This is actually a much more complicated issue than it seems, and you're mixing up a couple of different concepts.

First, the step-up in basis generally has nothing to do with a transfer, except a transfer on death. When property is inherited or otherwise transferred on death, it qualifies for the step-up.

Property that is in joint tenancy is treated a little differently than other property. Many people use joint tenancies as a substitute for a will, since it results in transfer of property on death automatically. And the tax law recognizes this.

As a result, the law says that, in general, when someone is a joint tenant he is treated, for estate tax purposes, as if he only owned the proportionate interest in the property that he paid for. (E.g. if he paid for 75% of the cost, he is treated as the owner of 75%.) It's not treated as a gift. So if a parent adds a child as a joint tenant on his home (and the child pays nothing for that), when the parent dies the entire value of the property is included in the estate of the parent, and the entire property gets a stepped-up basis. If the child dies first, none of the value of property is included in his estate.

With spouses it's different. Adding a spouse as a joint tenant (when the spouses are the only joint tenants) is treated as a completed gift that is not subject to gift tax. When one joint tenant spouse dies, half the value of the property gets a stepped up basis irrespective of who paid how much for the property.

Stu

Some more info:

1. State is a NON-community property state.

1. Yes, after dad put mom's name on deed, deed was in both their names

- I don't know whether as tenants-in-common, joint tenants, etc.

1. Mark, why do you say more research is necessary for property purchased by a single man in 1935?

Thanks, Tom

Ok, stepped up basis as to half.

It should be the same either way.

I think he's referring to the difference in community property laws in California. That shouldn't affect your situation.

Stu

Yes. I was simply referring to what looks like some very arcane rules that I read from the Calif. taxing authorities. Such as,

"After 12/31/34, quasi-community property included only tangible personal property until 9/20/47 when all personal property was included. Also, after 9/11/57 all real property in California was included. If the quasi-community property was acquired in a noncommunity property jurisdiction, the surviving spouse's interest obtains a stepped-up basis under R&TC Sections 18044 and 18045(a) since the property is considered to be acquired by inheritance from the decedent. See In Re Miller,

31 Cal. 2d 191, 187 Pac. 2d 722 (1947); Paley v. Superior Court, 137 Cal. App. 2d 450, 290 Pac. 2d 617 (1956); Estate of Patell, 221 Cal. App. 2d 376, 34Cal. Rptr. 512 (1963)."

This does not appear to apply to the OP's situation, but rather is illustrative of the chronological complexity of CA community property laws as they pertain to decedent and surviving spouse.

Really, who's ever heard of "quasi-community property"?

-Mark Bole

I hope gift tax returns were filed.

Seth