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| When one partner/spouse of a California registered domestic partnership or a same sex marriage dies, what are the step-up consequences, assuming that all property of the couple is California community property? For California purposes, do both halves of the community property get a step-up?
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Power Member
Group: Forum Members
Last Login: 3/12/2011 12:58:57 PM
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| I believe that for CA purposes both halves get stepped up in basis. The federal question is difficult; the rule for jointly held property between nonspuses is that the owner who dies first is presumed to own 100% of the property; 100% taxable and full step up. The other owner can show contribution to the property to reduce the % subject to estate tax. Any ownership by the surviving partner would not get a step up. If the property is held in the name of the decedent but it considered CP for state purposes, it would get a full step up but be 100% taxable. If the property is held in the name of the survivor; it wouldn't be taxable for IRS and would get no step up. At least, that's how I interpret the rules. Kitty Wright had an idea of how this would work with RDPs when she was doing 2007 year-end updates but I don't remember if she came to the same conclusions that I have. Also I would think partners in a same sex marriage (if it's upheld) would have the same rule as RDPs.
Mary Kay Foss
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Power Member
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Last Login: 1/6/2010 6:00:00 PM
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| Mary Kay, are you taking Sec. 3 of the Defense of Marriage Act into consideration? Sec 1014 steps up a surviving spouse's share of community property, and Sec. 3 says that "spouse" means spouse of the opposite sex, only. So for federal purposes, some community property may get a step up for the interest of the decedent, only. My guess is more will be written about this soon, given Prop 8.
John Jacobson
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Power Member
Group: Forum Members
Last Login: 3/12/2011 12:58:57 PM
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| I understand that the defense of marriage act requires one man and one woman. For purposes of my answer above I was assuming that property held by an RDP or same sex spouse who dies would be held as joint tenancy or separately. None of my answers assumed a valid marriage for federal purposes. I hope we will hear more about this soon. So many issues aren't reported on until someone goes to court, but I wish FTB would give some guidance.
Mary Kay Foss
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