STOCK BASIS

[terry]

Deceased taxpayer held stock joint tenancy with two sons. I am correct that each owned 1/3 interest & Mothers 1/3 would receive step-up or step-down. Two sons basis would be original carry over basis. Thanks in advance!

[imjulier]

That sounds right to me...

Julie

[michaelmars]

is this a 2009 or 2010 estate?

[terry]

is this a 2009 or 2010 estate?

Mother died in 2008. Sons sold stock in 2009. Sons did not contribute to purchase. Wouldnt the entire value of stock been included in her estate, therefore allowing sons full step-up? Totaling confusing myself now!

[jklcpa]

Since the stock was in all three names when mom died, only 1/3 of the value should be in the mom's estate. Her 1/3 gets the step up in basis. Because that stock was purchased entirely with mom's funds, in effect she gave each of her sons a gift of 1/3 of that stock at the time they became owners. The date mom put the sons' names on that stock is important in determining their basis.

If the sons became owners at the initial purchase, then their basis in their 1/3 is equal is the adjusted basis paid at that time. If the stock was 100% mom's and then she added their names later, then the rules for determining the basis of a gift would apply. If the FMV is greater than mom's adjusted basis on the date of the gift, then the sons pick up her adjusted basis on the date of the gift. If FMV is less than adjusted basis, it is more complicated. Here's a summary on the IRS site of determining the basis of gifted property.

After determining the basis of each of the sons' 1/3 ownership that they got from mom while she was living, to that you'd add whatever stepped up basis they inherited from mom's 1/3.

[jklcpa]

You didn't give dates, but the holding period of gifted property includes the donor's holding period. For the portion the sons inherited, the holding property of inheritied property is always considered long-term.

[jainen]

>>Sons did not contribute to purchase<<

According to the instructions to Schedule E of Form 706 at My link, "Generally, you must include the full value of the jointly owned property in the gross estate. However, the full value should not be included if you can show that a part of the property originally belonged to the other tenant or tenants and was never received or acquired by the other tenant or tenants from the decedent for less than adequate and full consideration...."

In my opinion, that means the full value of this stock must be included in the taxable gross estate (even if it is below the exclusion amount), triggering a step-up or down on the entire holding. In my further opinion, the fact that it was gifted into joint tenancy is not relevant because the mother retained the right of survivorship.

[terry]

You didn't give dates, but the holding period of gifted property includes the donor's holding period. For the portion the sons inherited, the holding property of inheritied property is always considered long-term.

This is stock purchased 30 years ago with sons names on with hers. Hmmmmmm. I see the responses are varied. Thanks again.