Members of the Maryland Association of Certified Public...

Tax questions

March 18, 1998

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: When a husband and wife jointly own a stock and one dies, what are the tax consequences if the surviving partner wants to sell 50 percent of the shares held in the joint name? What would be the tax consequences if the stock was not sold and the surviving partner dies and the stock is inherited? What is the basis of the tax there?

A: The tax consequences to the survivor depends on what shares were actually sold. The half of the stock that is received from the deceased spouse receives what is called a step-up basis. This means that if the survivor wishes to specifically identify and sell the stock received from the decedent, the gain or loss for income tax purposes would be measured from the value at the date of death of the spouse rather than at what was originally paid for the stock. However, if the survivor wishes to specifically identify and sell the share of the shares he or she originally owned (half of the original purchase), gain or loss for income tax purposes would be based on the original cost.

If the second spouse dies before the stock is sold, the full value of all the stock at the date of death of the second spouse would be included for federal estate tax and state inheritance tax purposes. The estate and other beneficiaries would then use the value of all of the stock at the second death to measure any gain or loss on a subsequent sale for income tax purposes.

James C. Wagenmann, CPA, Watkins, Meegan, Drury & Co., LLC, Bethesda

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To ask a tax question, call Sundial, The Sun's telephone ZTC information service, at (410) 783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County, 848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after the greeting. You can also submit questions by e-mail through The Sun's Web site: www.sunspot.net/tax.

Selected questions will be answered in the Business section. No questions will be answered personally.

Pub Date: 3/18/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.