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Member
 
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Last Login: 1/6/2010 10:32:28 AM
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| I know what it is, but I've never had to report it before on a 706. Even though it isn't subject to probate, and is similar to jointly owned property (except both halves get stepped up), it seems to me that Schedule A is the logical schedule. Does anybody know?
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Last Login: 12/17/2009 4:06:12 PM
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Mike,
Seems to me either Schedule A or Schedule E, Part 1, would be OK. I'd opt for the latter, because the property passes to the surviving spouse. And that fact may impact how trusts are funded.
In either case, it would be important to include a description of how the property was held, along with the description of the property. Just considering people looking at this 706 form in the future.
Bill Downs
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| Thanks Bill. I've done probably a couple hundred 706's over the past ten years or so. I'm familiar with putting a legal description on the schedule for a property, although it is hard to find one sometimes. I also include the assessor's parcel number, and I net nonrecourse liens against the property. I did intend to describe that the property was held as "community property with right of survivorship". I'm sure it will fly with the IRS either on Schedule A or on Schedule E, Part 1. I was just hoping somebody knew the formal requirements? The instructions don't refer to it, and the instructions for Schedule E, Part 1 state that you are to include any property where the decedent and the surviving spouse owned the property in the title of "joint tenants" or "tenants by the entirety". Community property with right of survivorship is handled similar to either one of the aforementioned titles, so I think I'll agree with you and put it on Schedule E, Part 1, unless someone has something more definitive. Thanks Mike
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I believe it goes to Schedule A, since it's inclusion in gross estate is governed by §2033, not §2040 as for joint tenancies. That also means that a valuation discount may be applicable.
Here is the link to an excellent article on this form of ownership, written by the James Henderson who teaches estate and gift taxation at Golden Gate University, SF:
http://www.ggu.edu/school_of_taxation/tax_news/attachment/Jim+Henderson+Article.pdf
Take a look at page two, last few paragraphs (under 'Tax treatment)
Grigori
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| That was a great article. I had been leaning toward Schedule A - just thinking about step-up vs no step-up but Bill's explanation made me think that the step-up did not depend on the 706 Schedule. However, the fact that creditors can attach the decedent's share of the CPWROS property makes me agree that Schedule A is preferable. Of course, you would describe how the title is held on either schedule.
Mary Kay Foss
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