To be stepped up cost basis or not to be stepped up cost bas
A client’s husband that passed away Nov of 2010 leaving her the sole owner of a stock portfolio that was held jointly, unfortunately most of the stocks are worthless but there are a few that have increased in value. My understanding and my question is “doesn’t she receive those stocks as an increased cost basis, at least for those that have increased, based upon the age of the primary’s death or is there no increase of cost basis because it was a joint account”?
My understanding is that she would have received the stocks in a stepped cost basis if they where inherited but I don’t quite understand the joint rules, even if she was the joint owner and not the primary owner. Please help I am getting more confused by minute.
Permalink Submitted by Bruce Steiner on Tue, 2012-07-24 01:34
The default for someone who died in 2010 is that the estate tax applies, with a $5 million exempt amount. In that case, the cost basis is equal to the estate tax value (generally the date of death value). In general, in the case of assets jointly held by a husband and wife, the basis is adjusted to the estate tax value as to a one-half interest. However, there are exceptions. The attorney handling the estate should be able to tell you how this works in this case.
The estate of someone who died in 2010 can elect carryover basis in lieu of estate tax. In that case, the basis is generally equal to the decedent’s basis, with certain adjustments. I co-authored an article on this for CCH which may be helpful: http://www.kkwc.com/library_cat/uf_Carryover_basis_article.PDF . Again, though, the lawyer handling the estate should be able to give you more specific advice.
Permalink Submitted by Alan Spross on Tue, 2012-07-24 01:45
If they happened to live in a community property state and the estate tax applies, there could be a 100% date of death basis adjustment instead of the usual 50%. States laws may vary with respect to the basis for accounts that are registered as JT accounts rather than as community property in such states.
Permalink Submitted by Eric Woodfill on Tue, 2012-07-24 09:47
Thank you very much