DOD basis adjustment in community property state

Technical topics regarding tax preparation.
#1
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General question, not for a real situation.

While reading another post about one spouse inheriting the deceased spouse's other 50% of a jointly owned S-Corp it got me wondering about the step up (or down) in basis if they are in a community property state. I've seen that in the case of a residence the surviving spouse gets their basis stepped up to 100% of the FMV on date of death unlike in a non-community property state where only the deceased spouse's 50% gets stepped up. Would this apply to stock in an S-Corp, or any other jointly owned property for that matter? Or is this something unique to the way a residence may be titled?

I am in Illinois and quite thankful that I only deal with a very few residents of CA and WI.
 

#2
JAD  
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The law is the same for all property. Proper titling is essential. Community property = step up to FMV as of date of death for the whole property. Community property with right of survivorship = same, no probate required. Property can also be held as joint tenants or as tenants in common. I do not remember the basis rules for these types of ownership. At least one of them results in only 50% of the property receiving a step up in basis.
 

#3
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Would this apply to stock in an S-Corp, or any other jointly owned property for that matter? Or is this something unique to the way a residence may be titled?


CA Family Code section 2581 ( property acquired in joint names during marriage, whether or nor the title document uses the words "community property" is in fact presumed to be CP unless rebutted in writing). Maybe different in other CP States.

Rev Proc 2004-35 Section 1362(a)(2) provides that an election to be an S corporation shall be valid only if all persons who are shareholders in the corporation on the day on which the election is made consent to the election.
Section 1.1362-6(b)(2)(i) of the Income Tax Regulations provides that when stock of the corporation is owned by husband and wife as community property (or the income from the stock is community property), each person having a community interest in the stock or income therefrom must consent to the S election.
 


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