Community Property vs. Joint ownership

[Bill Tubbs]

I am in Wisconsin (a community property state), and am questioning determination of basis of inherited assets:

Pub. 551, pg 9, under Community Property states:
"In community property states [...], husband and wife are usually considered to own half the community property." But then a couple sections later "Qualified Joint Interest" discusses "joint tenants with right of survivorship if husband and wife are the only joint tenants" and has a different calculation.

My question is: a couple had an investment account in both their names and "JTWROS" (Joint with Right of Survivorship) for decades. There was no pre-nup or anything else funky. In 2003 the husband died. There was no estate return filed. Is the wife's basis according to the Community Property rules (her basis is FMV at his death) or according to the Surviving Tenant rules because of the JTWROS? (I'm intentionally avoiding the implication that her basis was stepped up at his death because some of the investments actually held a loss at the time of his passing.)

The reason I asked is that I have read posts that the Community Property rules only apply if the property was titled as such. And these investment papers are titled "JTWROS".

Thanks,
Bill

[jainen]

It sounds like

It sounds like these assets were held as joint tenancy, NOT community property. This was their choice, perhaps because community property does not carry a right of survivorship and must be publicly probated to determine whether the spouse is the correct heir. If she just took all the goodies without submitting them to probate, it's hard to argue three years later that it was community property all along.

[Bill Tubbs]

Think I found my answer

... at least for Wisconsin, which is where I am.

http://www.revenue.wi.gov/pubs/pb113.pdf pg 31 (pg 33 of the PDF)
"Under Wisconsin law, it is possible for property to be
titled as individual property or in a common law estate
(e.g., joint tenancy or tenancy in common), but still be
marital property. The IRS has ruled that this property
qualifies for the double basis adjustment applied to
community property. [Rev. Rul. 87-98, 1987-2 C.B.
206.] Because of this, it is necessary to know when
property is actually held as marital property."

So, looks to me that this investment account does get the double step-up (or double step-down). Wife never worked, so all income was husband's. But his income while married was a marital asset, and once he mixed that with any investments that may have been his before marriage, that all became martial property (pg 31, right column, 4th paragraph).

Jainen -- thank you for taking the time to respond. By the way, what state are you in?

Bill

[jainen]

I'm in California

I'm in California, and we generally treat marital assets as community property regardless of how they are titled. Our courts have been supportive of that (especially the divorce courts!) and the legislature has now provided a new way to title community property with right of survivorship. Thanks for the citation, it helps me understand why we do it this way.

[Jiggers]

How about Texas?

How does Texas treat property that is titled something other than community property?