"A.G. Kalman" <agk202[at]netscape.net> wrote:
- quote -

Lawyers have tried to use that clause in divorce cases, and
failed. A very creative approach I think. But that's why
there's a specific statute now saying that you can't do
that.

Stu

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Stuart O. Bronstein wrote:
- quote -

Sorry about that. I didn't mean to imply that preparation of
a will negates the presumption. I merely meant, that upon
death the confirmation of community property in the will of
the decedent will trump the presumption. You are correct,
divorce is another matter.

--

Alan
http://taxtopics.net

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"A.G. Kalman" <agk202[at]netscape.net> wrote:

- quote -

Since you mentioned California, the last statement is not
completely accurate with respect to that state. Wills often
include a phrase such as, "All property held as joint
tenancy be me and my spouse is held as such for convenience
only and is in fact community property."

A clause like that will be effective in California only
after the party who wrote the Will dies. That phrase cannot
be used in, say, a divorce action to determine the status of
property.

Stu

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mat1040x[at]aol.com (MAT1040X) wrote:

- quote -

The only state mentioned in the original question was
California, though admittedly he didn't specify that as his
residence.

In California, property acquired during marriage is
community unless specified otherwise in writing. A deed
designating JTWS is, of course, a document, and it specified
a way of holding title other than as community property. So
unless there is a subsequent document, either deed or other
document, that indicates the intent of the spouses to hold
title as community property, a JTWS deed means that it is
not.

- quote -

That's basically the rule in California.

- quote -

The answer depends on the state you are in. Talk to a tax
lawyer in Arizona, rather than someone who does divorce or
something else, and you're likely to get a better answer.

Stu

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AES/newspost wrote:

- quote -

I had sent a reply to this post on 10/30 that appears to have
been lost in the ether of the internet. Rather than repost it and
duplicate what has been said, I will only add my two cents based
on experience with two CA estates and two estate attorneys.
Naturally, one should discuss this with a professional who
practices in this area (not me).

When two people marry their separate property (SP) remains
separate and property acquired in the marriage is assumed to be
community (CP). Certain actions will negate the presumptions.
A pre-nuptial agreement, a post-nuptial agreement, a community
property agreement, a will or a recording of a deed can impact
the presumptions. Some examples: 1. A pre-nup states that all
property acquired in the marriage will only be CP if recorded as
such. 2. A CP agreement states that all property acquired in the
marriage regardless of how recorded is CP. (An aside here about
CP agreements. One needs to be careful about the wording. If
there is separate property and the desire is to keep it separate,
then the CP agreement should identify that property.) 3. A
property deed is recorded as JTWROS, rather than as husband and
wife and there is no pre-nup, post-nup or CP agreement.

In example 1, the CP presumption is trumped by the use of
recording a deed as JTWROS. In example 2, property acquired and
recorded as JTWROS is trumped by the CP agreement and would be
CP. In example 3, property acquired and recorded as JTWROS
trumps the presumption of CP unless the will of the decedent
confirmed that the property was CP.

Relative to example 3, it is my understanding that the IRS will
not treat the property as CP unless there is a written document
confirming it is CP. When CA changed the civil code, effective
7/1/01 and added the CPWROS title, it only served to reinforce
the IRS position that JTWROS is not CP without some affirmative
statement to the contrary.

Finally, I'm not sure the two questions asked were answered.
The rule on step-up or step-down of basis for property of a
decedent applies to all property. The last question is somewhat
ambiguous, but assuming that the couple are still together and
have not taken any affirmative step to change ownership, the mere
fact they remove themselves from their residence does not change
the ownership. If it was CP and one spouse dies, there would be
a 100% step-up in value.

--

Alan
http://taxtopics.net

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"Stuart O. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

For those who live in one of the nine Community Property
states, holding title that way legally eliminates huge
capital gains tax liability In Kal-I-forn-ia, where are
houses are gold mines, it frequently saves hundreds of
thousands of tax dollars or more.

BC

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BILL NUMBER: AB 2913 CHAPTERED 09/26/00
CHAPTER 645
FILED WITH SECRETARY OF STATE SEPTEMBER 26, 2000
APPROVED BY GOVERNOR SEPTEMBER 24, 2000
PASSED THE ASSEMBLY AUGUST 28, 2000
PASSED THE SENATE AUGUST 22, 2000
AMENDED IN SENATE AUGUST 18, 2000
AMENDED IN SENATE JUNE 14, 2000

INTRODUCED BY Assembly Member Kuehl

MARCH 15, 2000

An act to add Section 682.1 to the Civil Code, relating to
community property.

LEGISLATIVE COUNSEL'S DIGEST

AB 2913, Kuehl. Community property.

Existing law provides that upon the death of a married
person, 1/2 of the community property of a husband and wife
belongs to the surviving spouse and the other half belongs
to the decedent.

This bill would provide that the community property of a
husband and wife when expressly declared in a transfer
document to be community property with right of
survivorship, shall pass to the survivor upon the death of
one of the spouses, without administration. The bill would
also permit the right of survivorship to be terminated prior
to the death of either spouse, as specified. This provision
would be operative July 1, 2001, and would apply to
instruments created on or after that date.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 682.1 is added to the Civil Code, to read:
682.1. (a) Community property of a husband and wife, when
expressly declared in the transfer document to be community
property with right of survivorship, and which may be
accepted in writing on the face of the document by a
statement signed or initialed by the grantees, shall, upon
the death of one of the spouses, pass to the survivor,
without administration, pursuant to the terms of the
instrument, subject to the same procedures, as property held
in joint tenancy. Prior to the death of either spouse, the
right of survivorship may be terminated pursuant to the same
procedures by which a joint tenancy may be severed. Part I
(commencing with Section 5000) of Division 5 of the
Probate Code and Chapter 2 (commencing with Section 13540),
Chapter 3 (commencing with Section 13550) and Chapter 3.5
(commencing with Section 13560) of Part 2 of Division 8 of
the Probate Code apply to this property.

(b) This section does not apply to a joint account in a
financial institution to which Part 2 (commencing with
Section 5100) of Division 5 of the Probate Code applies.

(c) This section shall become operative on July 1, 2001, and
shall apply to instruments created on or after that date.

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- quote -

This issue has been a source of confusion for many. Section
1014(b)(6) is as follows:

(6) In the case of decedents dying after December 31, 1947,
property which represents the surviving spouse's one-half
share of community property held by the decedent and the
surviving spouse under the community property laws of any
State, or possession of the United States or any foreign
country, if at least one-half of the whole of the community
interest in such property was includible in determining the
value of the decedent's gross estate under chapter 11 of
subtitle B (section 2001 and following, relating to estate
tax) or section 811of the Internal Revenue Code of 1939;
(End)

Whether or not property is determined to be community
property is the basic question. Does holding title as JTWS
keep the property from being community? Or does the way
title is held overcome everything else? In Arizona, there
is a law that allows property to be held as "Community
property with rights of survivorship". On the other hand,
there is an Arizona statute that says all property acquired
during marriage is community property (paraphrased).
Attorneys have told me that because there is the ability to
title property as "Community property with rights of
survivorship", that property held as JTWS does not qualify
as community - it could have been titled differently. Other
attorneys have said that the Arizona statute overrides how
title is held and, regardless of title, all property is
community property if obtained during marriage and then both
halves receive a step up in basis.

So, what is a person to do? Who do you believe? How is
this ever going to get resolved? Wish someone had a
definite answer.

Mary Ann Thomas, EA in AZ

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bgold[at]nyx.net (Barry Gold) wrote:

- quote -

The rule in California is that property acquired during
marriage, other than by gift or inheritance, is community
property unless a document in writing says something else.

Most title companies automatically title all properties
bought by couples, as joint tenancy. Technically, those
properties are not community property.

This became such a problem that a year or two ago the
legislature created a new form of title called community
property with rights of survivorship. It is treated exactly
like joint tenancy property, but it's considered community
property. I have seen few if any title companies that have
picked this up yet.

Stu

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"Joel Berry, CPA" <joelDELETE[at]sugarlandcpas.com> wrote:
- quote -

This is not a state tax issue. This is based on the federal
tax code. The statute simply says that community property
gets a stepped up basis. No other kind of jointly held
property qualifies. Section 1014(b)(6) says,

"In the case of decedents dying after December 31, 1947,
property which represents the surviving spouse's one-half
share of community property held by the decedent and the
surviving spouse under the community property laws of any
State, or possession of the United States or any foreign
country, if at least one-half of the whole of the community
interest in such property was includible in determining the
value of the decedent's gross estate under chapter 11 of
subtitle B (section 2001 and following, relating to estate
tax) or section 811 of the Internal Revenue Code of
1939...;"

Stu

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AES/newspost wrote:

- quote -

It applies to all COMMUNITY PROPERTY, regardless of use.
However, watch out for titled property that has only one
name (i.e. pre-marriage), or real estate deeded "X, a
married person, as sole and separate," or
previously-inherited property. None of these are community
property unless specifically converted by an overt act.

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AES/newspost <siegman[at]stanford.edu> wrote:

- quote -

This is for discussion purposes only. I'm not a lawyer or a
tax professional.

It doesn't matter whether it's their primary residence, or
any residence, or whether it is real estate.

If it is community property, then it will receive a 100%
basis step-up. If it is "merely" Joint Tenancy, it will
receive only a 50% step-up. The problem seems to be that
there is no specific "community property" designation for
titling property, real or otherwise.

Some people have simply completed a simple agreement that
any property held in both names is community property, and
left a copy with their lawyer. That seems to satisfy any
questions.

However, I'll note that the default in California is that
property held jointly is part of the community, and that any
property earned during the marriage or bought at least
partly with money earned during the marriage is community
property. So the "operative rule" you mentioned above
should apply. The agreement is just further evidence of
something that should be self-evident.

--
I pledge allegiance to the Constitution of the United States
of America, and to the republic which it established, one
nation from many peoples, promising liberty and justice for
all.

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AES/newspost <siegman[at]stanford.edu> wrote:

- quote -

Not quite. Property held as community property receives a
100% stepped up basis on the death of one spouse. Other
types of jointly held property do not. This rule is
contained in section 1014(b)(6) of the Internal Revenue
Code.

- quote -

It applies to all property owned as community property: real
estate whether lived in or not, stocks, antiques - whatever.

Stu

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"AES/newspost" <siegman[at]stanford.edu> wrote:

- quote -

In Texas, all assets get a stepped-up basis. For community
property, the surviving spouses's community interest is also
stepped-up, not just the decedent's half. My understanding
is that community property rules vary slightly from state to
state, so I'm not sure if it works the same way in
California.

Joel Berry
Sugar Land, Texas

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AES/newspost <siegman[at]stanford.edu> wrote:

- quote -

It is my understanding (I live in Washington, also a
community property state) that ALL assets of the decedent,
jointly owned or owned by the decedent, receive a 100%
stepup in cost basis at date of death.

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My amateur understanding is that in community property
states such as California, property that is jointly owned by
a married couple receives a 100% basis step-up if inherited
by the surviving spouse at the time of the first death.

(Or at least, despite some IRS objections this seems to be
the operative rule; and this can be very advantageous in the
case of a highly appreciated primary residence.)

My question is, does this apply only to their primary or
principal residence? Or to all property? Or all real
estate? Or . . . ?

And in particular, what if the couple has moved out of (or
been moved out of) a primary residence, but still own it?

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