Step-up in basis of community property

All community property assets are stepped up or down 100%. This is different than joint tenancy, where only the decedent's interest gets stepped up/down.

Doesn't it depend on the state? I don't live in a community property state, but I seem to recall that some of the CP states have different ruies than the others. (that is, 100% step up vs. 50% step-up regardless of who contributed the capital for the asset).

Ira Smilovitz

I am the original poster. A website by an attorney in California

states "For tax purposes (i.e. step up in basis) property must be titled Community Property or another document signed by both spouses is needed." This answer seems to contradict Alan's answer. Can someone quote a definitive source to determine whether community property titled in the husband's name gets a step-up in basis on the death of his wife. (The original account holder is still alive.)

If you want a definitive source, hire local competent counsel. Anything else is just the interpretation of someone who may or may not be skilled in the art of legal interpretation.

Ira Smilovitz

No. The only issue that might be determined under state law is whether or not property is actually community property or not. If its, it gets a 100% step up in basis under IRS ?1014.

The issue is whether or not property is community property. If it is titled in the name of only one spouse, that will be the question.

In California the rule is that all property acquired during marriage (other than gifts or inheritances) is presumed to be community property, unless there is some writing that has changed that.

Most wills I've seen written in California say something to the effect that anything not titled as community property actually was done that way for convinience but it was really community property. That is supposed to resolve the issue of property titled in joint tenancy so it can be passed without probate.

In OP's case, he does not say why he thinks the property is community property while at the same time saying it's not in both spouses' names. Until that gets clarified, there is no good way to answer his question.

I concur. I have also seen a specific document either stating a certain asset (or perhaps everything) is community property, or it is now as this document is evidence of a marital gift of separate property into community property.

Right. To convert California property into or out of community property, it must be done in writing. The problem with couples taking property as joint tenants (which title companies often do automatically because it avoids probate) is problematic for that reason: the deed is a writing that says something other than community property.

A couple of years ago legislation was passed in California that makes joint tenancies for married couples obsolete. Now couples can take property as "community property with rights of survivorship." From a practical standpoint it's exactly like joint tenancy, but it's just called community property so it will qualify under ?1014. Title companies and real estate agents haven't quite caught on yet, but hopefully they will one day.

For federal taxation, as long one half of the value of the community property is included in the deceased spouse's gross estate, 100% step up/down occurs.