Question
Assume that H and W are considering the purchase of a vacation home for $200,000. H will provide the down payment of $40,000 by selling
Assume that H and W are considering the purchase of a vacation home for $200,000. H will provide the down payment of $40,000 by selling securities he owns in his own name. The balance will be financed by a mortgage payable monthly over a period of thirty years. H will make all subsequent monthly payments for the mortgage principal and interest, real estate taxes, and insurance on the property from his salary.
a. From a nontax standpoint, should title be taken in the name of H and W as joint tenants with right of survivorship?
b. What would be the gift consequences of the joint tenancy arrangement:
(i) On the creation of the joint tenancy?
(ii) When H makes the monthly payments, which include payment of the mortgage principal and interest, insurance on the property, and real estate taxes?
(iii) If W pays for these items?
c. What would be the estate tax consequences of the joint tenancy on the deaths of H and W:
(i) Assuming H predeceases W? Is the marital deduction available? See Tech. Adv. Memo. 200104008.
(ii) Assuming W predeceases H? Is the marital deduction available? See Tech. Adv. Memo. 200104008.
(iii) Assuming H and W die together, for example, in an automobile accident, and it is impossible to establish the order of their deaths? Under 3 and 6 of the 1940 Uniform Simultaneous Death Act, each is deemed to die last with respect to joint tenancy property. See Rev. Rul. 76-303. Does 2040(b) change the result?
d. What would be the income tax consequences of the joint tenancy if on Hs death the value of the home equals $300,000? Consider 1014(a), (b)(9).
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