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Posted by Drew Edmundson on April 12, 2006, 11:09 pm
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>> Under section 2036, for joint tenancies between unmarried
>> people ownership is based solely on the consideration each
>> paid. When the gift is complete is irrelevant for this
>> purpose because even when there has been a completed gift
>> it's treated as if it didn't happen for tax purposes.
> 2036 doesn't discuss joint tenancies. It discusses retained
> life estates. The two are different. Joint tenancies are
> discussed in 2040.
I see I didn't transition very well here. The prior
paragraph mentions the estate tax Code sections on joint
tenancy and retained life estates. The next paragraphs
discuss the gift tax Regulations on joint tenancies. The
actual gift tax Code section is obviously 2511. Sorry about
that.
> The gift is considered as complete in many, but not all,
> joint tenancy situations. It just is still drawn back into
> the estate if the grantor of the joint interest provided all
> the consideration. Then a credit is computed for the prior
> gift tax paid, if any.
>
> See 25.2511-1(h)(4) and (5). In 25.2511-1(h)(4) the
> original owner adds a joint owner to his bank account. The
> original owner is still considered the owner of the entire
> account for gift tax purposes, until the new joint owner
> withdraws funds. This is because the original owner can
> unilaterally take back the gift.
>
> In 25.2511-1(h)(5) the original owner adds a joint owner to
> real estate. This is a completed gift for gift tax purposes
> but not for estate tax purposes (see 2040). That is why a
> credit is allowed for the previously paid gift tax, to avoid
> the double tax. In both examples I am assuming that the two
> joint owners are not spouses. Rules for spouses are
> different.
---
Drew Edmundson, CPA
Cary, NC
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