[WSBARP] A *complicated" Quitclaim Deed situation.

[John J. Sullivan]

Mary:

1.  Real concern. That’s why instead of claiming the exemption for undoing CP I would draft the deed as a gift conveyance to the other spouse as her CP. you can have a CP interest without being on title. That may mean needing to probate it at the donor’s death though all things being equal a CP Agreement might work for them. 

2. There’s an unlimited marital deduction for gifts and inheritances to and by a citizen spouse (over and above the $2.2/$11.2M lifetime exemption. Assuming both are citizens it might not matter other than having to file a Form 709 if making it SP. But if it’s a gift that retains it CP character then the value is split between the two estates at a death. 

John J. Sullivan

Sent from my iPhone

> On Jul 7, 2021, at 9:17 AM, Kary Krismer <Krismer at comcast.net> wrote:
> 
> The reason I always mention step up in basis with CP issues is that quite frankly I'm not 100% sure of the results.  There are two issues I'm concerned about.
> 
> 1.  If CP then the basis of the entire property steps up, not just the 1/2 interest of the deceased spouse.  I'm not 100% certain that a QCD would change that result, because I'm not 100% sure a QCD actually changes the status of the property from CP to separate property.  Title is not necessarily determinate of CP status.  But if it did change that result that could be very bad. Arguably you'd go from 100% step up in basis to no step up in basis.
> 
> 2.  There's also the issue of estate taxes.  I believe CP going to the surviving spouse is exempt from taxation, so I don't believe the transfer to the spouse prior to death helps with estate taxes (either federal or state).  What I don't know is whether the transfer might cause some adverse estate tax result.
> 
> Kary L. Krismer
> 206 723-2148
> 
>> On 7/7/2021 9:01 AM, John J. Sullivan wrote:
>> Oops. I meant the “former.”  Resident aliens are generally treated the same as citizens for tax purposes. But capital assets inherited from either generally receives a step up in basis (unless IRD).
>> 
>> Thanks for the catch to Roger Hawkes. That’s what I get for listserving on the iPhone before my coffee.
>> 
>> John J. Sullivan
>> 
> 
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