J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

5.18 Joint Tenancy Basis Rules for Surviving Tenants

If you are a surviving joint tenant, your basis for the property depends on how much of the value was includible in the deceased tenant’s gross estate, and this depends on whether the joint tenant was your spouse or someone other than your spouse.

Caution:

If you inherited property from a person who died in 2010 and the executor elected on Form 8939 to apply the modified carryover basis rules (5.17), basis will be determined under that election.

Qualified joint interest rule for survivor of spouse who died after 1981.

A “qualified joint interest” rule applies to a joint tenancy with right of survivorship where the spouses are the only joint tenants, and to a tenancy by the entirety between a husband and wife. Where the surviving spouse is a U.S. citizen, one-half of the fair market value of the property is includible in the decedent’s gross estate. This is true regardless of how much each spouse contributed to the purchase price. Fair market value is fixed at the date of death, or six months later if an estate tax return is filed and the optional alternate valuation date is elected. These rules do not apply if the surviving spouse is not a U.S. citizen on the due date of the estate tax return. In this case, the basis rule is generally the same as the rule discussed below for unmarried joint tenants.

The surviving spouse’s basis equals 50% of the date-of-death fair market value (the amount included in the decedent’s gross estate), ...