Discussion Archives:Basis of stock in JTWROS

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Discussion Forum Index --> Advanced Tax Questions --> Basis of stock in JTWROS


Discussion Forum Index --> Tax Questions --> Basis of stock in JTWROS

Sierrafc.com (talk|edits) said:

11 October 2007
I am trying to understand the basis calculation for a stock account my grandmother set up for me. Here is what I know:

1) Grandma set up brokerage account for the two of us as JTWROS 2) She contributed all funds over a number of years to the account. No money ever withdrawn. 3) I was told by my Dad to start paying taxes when issued 1099's from brokerage for ordinary and cap gains a few years ago 4) Grandma still living but she wanted to transfer all of it into my name only.

My questions are:

1) Should I be reporting the ordinary and capital gains? 2) Would it be tax advantageous to leave in JTWROS until she passes away or put it all in my name now? 3) How would I determine basis at either date?

I am inclined to think that I should not report any taxable income, that I should leave the money in the account until she has deceased, and that I would get a 100% step up in basis when she passes away because it would all be a part of her estate.

Someone please help provide some clarity!!

Thanks!

Bengoshi (talk|edits) said:

11 October 2007
I'm inclined to concur with you but....how are the securities within this joint brokerage account registered -- in "street name" or in the name of your grandmother and yourself? Assuming that the investments in the joint brokerage account are registered in street form, Rev. Rul. 69-148, 1969-1 CB 226 seems on point. Even though grandma contributed everything and put you on the account (w/ the right to sever your respective interest), there hasn't been a completed gift for gift tax purposes since you haven't withdrawn any funds (assuming that grandma can go and take back everything at any time without accounting to you).

My guess is that if your grandma is treated as retaining dominion and control over the joint brokerage account, she (and not you) will be subject to income tax on gross income from that account. Also, assuming the account remains as is, under the "consideration furnished" rule in IRC 2040, the full value of the joint account will likely be included in grandma's gross estate upon her passing. This should provide a full "step up" in the income tax basis for the survivor.

But if the investments within the account are registered in your grandma's and your name (and not in the name of the brokerage), the results might be different. I'm too tired to look into this right now though.

Sierrafc.com (talk|edits) said:

11 October 2007
Thanks for your comments. I'll see whose name they are registered under.

Death&Taxes (talk|edits) said:

11 October 2007
I was never aware there was a difference at death between stock held in street name and that in a safe deposit box, for example. Nor was a national law firm which for some reason engaged me to do the 706 for a client's uncle. I included the jointly owned stock in the estate because the uncle had bought all of it, some in street name and some held in his own right. I'd like to hear more.

Bengoshi (talk|edits) said:

11 October 2007
D&T, I'm not sure there is a difference at death... the distinction between JTWROS property held in street name vs. in the names of the joint tenants seems to apply for gift tax rather than estate tax purposes (i.e., it goes to the question of whether there's a completed gift, which in turn may determine who is subject to income tax on income from the JTWROS property).

My understanding is the gift tax treatment of JTWROS property does not necessarily impact the estate tax treatment of the same property -- that is, the original non-spousal contributing tenant could have the full value of the JTWROS prop included in her gross estate, despite having made a completed gift of an interest in the same property. I wonder if I'm making sense b/c I'm confusing myself... : )

Kevinh5 (talk|edits) said:

11 October 2007
no, Bengoshi, you are making sense in spite of confusing yourself. Not because.

Bengoshi (talk|edits) said:

11 October 2007
Thanks Kev. It's been a while since I looked into this and I have a hard time remembering all these little distinctions.

Death&Taxes (talk|edits) said:

11 October 2007
Gift tax? What's that? Image:smile.jpg Just wanted to give Kevin something to rail about.

JimS ME (talk|edits) said:

12 October 2007
Also, if your grandmother did not give up rights and control over the account, you will get a full step up in basis when she passes.
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