IRC 2040 vs. 1014: Does Adding a Child to Your Deed Kill the Step-Up in Basis? скачать в хорошем качестве

IRC 2040 vs. 1014: Does Adding a Child to Your Deed Kill the Step-Up in Basis?

We are performing a forensic review of the "Joint Tenancy with Rights of Survivorship" (JTWROS) strategy—a common probate avoidance tool that often backfires. While adding a child to your deed ensures the property passes to them automatically upon death, it frequently triggers an immediate Gift Tax reporting requirement (Form 709) and complicates the "Step-Up in Basis" calculation under IRC Section 2040. As The Finance Observer, I analyze the specific intersection of the "Consideration Furnished Rule" and the Gift Tax statutes to show why this "shortcut" exposes your home to your child's creditors and creates a potential "Capital Gains Trap" if the property is sold before you pass away. FORENSIC BREAKDOWN: 0:00 The Probate Avoidance Shortcut: Why parents add children to deeds as JTWROS (and the hidden risks). 01:22 The Gift Tax Trigger (IRC § 2511): Why the IRS views this as an immediate gift of 50% of the home's value, triggering the requirement to file Form 709. 03:45 The "Consideration Furnished" Rule (IRC § 2040(a)): The critical test that determines if the child gets a partial or full Step-Up in Basis upon the parent's death. 05:15 The Creditor Risk: How your home becomes an asset in your child's potential bankruptcy or divorce proceedings. 06:50 The Capital Gains Trap: The mathematical loss if the house is sold before the parent dies (losing the IRC 121 exclusion for the non-resident child). 08:30 The "Life Estate" Alternative: Comparing JTWROS to a Life Estate Deed or a Revocable Living Trust for cleaner tax efficiency. DISCLAIMER: I am The Finance Observer. This content is for educational purposes only. Joint Tenancy rules are governed by state law and IRC Section 2040. Gift Tax reporting is governed by IRC Section 6019 and Form 709. The Step-Up in Basis is determined by IRC Section 1014. Always consult a qualified Estate Planning Attorney or CPA before altering real estate deeds.