Reply To: Step up cost basis on a house

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#3772
kaneohe
Participant

I don’t know the official answer so you may want to see a lawyer.

In the strictest interpretation, if you held title as jt. tenants, the basis is stepped up on only on half the property.
https://www.ca-trusts.com/jointtenancy.html

“When a married couple owns an appreciated asset as community property, the surviving spouse will get a step-up in the cost basis to the fair market value at the date of death of the other spouse. ………………. But if the residence is held in joint tenancy, it is more likely that some capital gains tax may be due because only half of the property receives a new basis”

If you held title as community property or in a jt revocable living trust, you would also get a full step up in basis.

If you had a community property agreement, you might also get a full step up in basis. https://www.ssslaw.com/practice-areas/estate-planning/wills-trusts/community-property-agreements/

“In the absence of a community property agreement, California law generally allocates ownership of marital property as follows:

Assets acquired prior to the marriage are retained by their individual owners;
Assets acquired during the marriage are community property (both spouses have equal ownership interests), except;
Assets acquired by gift, inheritance, or bequest during the marriage remain the sole property of their recipient.”

So the question is if the property is actually community property but is not titled as such, how is it handled in the absence of a community property agreement? I don’t have a link but I seem to recall that someone got property titled as jt ownership classified as community property after the first spouse’s death by filling out some document…..
perhaps a lawyer would know.

another interesting article: https://www.cpajournal.com/2017/08/18/greatest-hits-community-property-step-basis/