Discussion:CA Joint Tenancy and Step up basis

Client's sister bought a share of a co-op for $72,000 with her own funds and added my client as a joint tenent.

In 2004 sister died. Estimated value at DOD was $371,000

In 2007 client sold the coop for $272,564 net of commissions and selling expenses.

My question revolves around how CA joint tenancy works. I know that joint tenents in CA automatically have right of survivorship, but when the j/t is created do the tenents automatically, by law, have a 50/50 split of the income and/or property interest?

If that is the case the client's basis on the date of sale would be:

$36,000 + $185,500 = 221,500

Or would the client recieve the full step up to $371,000?

CA Civil Code §683(a) confused me when it stated " A joint interest is one owned by two or more persons in equal shares...."

If the other person paid the mortgage payments then the principle payments would be added to their basis, and then the step-up would be allocated pro rata based on their respective basis'?

If one person provided 2/3 and the other only 1/3, then the decedent's portion would get stepped up based on the relative % of contribution

I'm a little torqued now. Not only has my client's confidence been eroded, but either the IRS is giving bad advice, or I am giving bad advice.

I'm pretty sure that Kev and I are in the right. We even match with the example given in Pub 551. So I gave the client the cite from Pub 551, advised her to request written advice from the IRS next time, and I would take a look through the Tax Court cases.