Jtwros Step-Up In Basis Non Spouse

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Joint Tenancy with Right of Survivorship (JTWROS) Step-Up in Basis for Non-Spouse Beneficiaries

An Unexpected Inheritance

Life can take unexpected turns, and sometimes that includes receiving an inheritance from someone you may not have been particularly close to. Such was the case for Emily, who recently found herself the recipient of a house from her distant cousin, Martha. While Emily was initially surprised and grateful for the inheritance, she soon realized that there were some potential tax implications to consider.

Martha had owned the house for many years, and its value had appreciated significantly during that time. Emily knew that if she were to sell the house, she would likely have to pay capital gains tax on the difference between the original purchase price and the sale price. However, she also knew that there might be a way to avoid or minimize these taxes if she could “step up” the basis of the house to its current market value.

The Concept of “Step-Up in Basis”

When you inherit property, the basis of the property is generally the same as the deceased person’s basis. This means that if the deceased person purchased the property for $100,000 and it is now worth $200,000, your basis in the property will also be $100,000. If you were to sell the property for $200,000, you would have to pay capital gains tax on the $100,000 gain.

However, there is an exception to this general rule for property that is held in joint tenancy with right of survivorship (JTWROS). In the case of JTWROS property, the surviving joint tenant can step up the basis of the property to its current market value as of the date of death of the deceased joint tenant. This means that Emily could step up the basis of the house to $200,000, and if she were to sell the property for $200,000, she would not have to pay any capital gains tax.

Eligibility for Step-Up in Basis for Non-Spouse Beneficiaries

The step-up in basis for JTWROS property is generally only available to surviving spouses. However, there are some exceptions to this rule. One exception is for non-spouse beneficiaries who receive property from a deceased joint tenant who was not related to the beneficiary by blood or marriage.

In Emily’s case, Martha was not related to Emily by blood or marriage. This means that Emily is eligible for the step-up in basis for the house, even though she is not Martha’s spouse.

Procedure for Stepping Up the Basis

To step up the basis of JTWROS property, the surviving joint tenant must file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, with the Internal Revenue Service (IRS). The Form 706 must be filed within nine months of the date of death of the deceased joint tenant.

The Form 706 will ask the surviving joint tenant to provide information about the deceased joint tenant, the property, and the value of the property as of the date of death. The IRS will use this information to calculate the step-up in basis for the property.

Tips and Expert Advice

If you are a non-spouse beneficiary of JTWROS property, it is important to be aware of the step-up in basis rules. These rules can save you a significant amount of money in capital gains taxes if you decide to sell the property.

Here are some tips for maximizing the benefits of the step-up in basis:

• Determine if you are eligible for the step-up in basis. Not all non-spouse beneficiaries are eligible for the step-up in basis. You must be able to prove that the deceased joint tenant was not related to you by blood or marriage.
• File Form 706 on time. You must file Form 706 with the IRS within nine months of the date of death of the deceased joint tenant. If you file late, you may lose the step-up in basis.
• Get professional help. The step-up in basis rules can be complex. If you are not sure how to file Form 706 or if you have any other questions about the step-up in basis, it is a good idea to seek professional help from a tax advisor or an attorney.

FAQs

Q: What is a JTWROS?
A: A JTWROS is a joint tenancy with right of survivorship. This means that when one of the joint tenants dies, the other joint tenant automatically becomes the owner of the property.

Q: Is the step-up in basis available to all non-spouse beneficiaries of JTWROS property?
A: No. The step-up in basis is only available to non-spouse beneficiaries who can prove that the deceased joint tenant was not related to them by blood or marriage.

Q: How do I file for the step-up in basis?
A: To file for the step-up in basis, you must file Form 706 with the IRS. Form 706 must be filed within nine months of the date of death of the deceased joint tenant.

Q: What are the benefits of the step-up in basis?
A: The step-up in basis can save you a significant amount of money in capital gains taxes if you decide to sell the property.

Conclusion

The step-up in basis for JTWROS property can be a valuable tax-saving tool for non-spouse beneficiaries. If you are eligible for the step-up in basis, it is important to take advantage of it by filing Form 706 with the IRS on time.

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