Question

Cody and Reese were married years ago and had one child, Amber. Cody and his longtime friend, Kandi, were recently flying in Kandi’s new plane. For a brief period Kandi was distracted and lost control of the plane. Unfortunately, the plane crashed and Kandi died instantly and Cody died a few days later as a result of the injuries sustained during the crash. When Cody died he and Reese owned the following property: • Home valued at $1,000,000 held tenancy by the entirety. • Car 1 valued at $15,000 held fee simple by Cody. • Car 2 valued at $20,000 held Joint Tenancy with Rights of Survivorship by Cody and Amber. • Inherited diamond ring collection valued at $3,000,000 held fee simple by Reese. • Boat valued at $500,000 held tenancy in common by Cody and Amber. • Life Insurance Policy 1 on Reese’s life, owned by Cody. The fair market value of the policy was $100,000 and the death benefit was $200,000. The beneficiary is Amber. • Life Insurance Policy 2 on Cody’s life, owned by Cody. The fair market value of the policy was $80,000 and the death benefit was $600,000. The only beneficiary is Kandi. • IRA account valued at $2,500,000 owned by Cody with Amber as the beneficiary. • Irrevocable Trust by Cody for the benefit of Amber created five years ago. The trust is valued at $400,000, and Amber is the beneficiary at Cody’s death.

$100,000Cody and Kandi paid $100,000 for a vacation home held in JTWROS. Cody put up $75,000, and Kandi put up $25,000. When Kandi dies, how much will the IRS try to include in his gross estate?

$0

$25,000

$50,000

$75,000

$100,000

Answer 1

JTWROS or joint tenant with rights of survivorship is a kind of agreement entered into by atleast two persons where the co-owners have equal right in ownership, irrespective of the amount contributed by each member.

It also states tjat in case of deaath of any one of the member, the property will be owned by the surviving member(s).

As Cody died few days after the death of Kandi, hence Cody was the only owner of the vacation home.

For the JTWROS IRS will include the total value of vacation home i.e. $100,000 as Cody's gross estate.