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<<O.K., I must be missing something here. I think you're telling me that the proper approach is filing of a gift tax return at the time the joint tenancy is created. In my example, the house is worth $200,000, so $100,000 (or $90,000) of the unified credit is used up upon filing the gift tax return. Right so far?>>

Let me say, right up front, that Chris is RIGHT ON with all of his posts on this issue. And he does a much better job of explanation that I do. I lost the thread of the post, and was trying to confirm what Chris was saying...but I got my facts all screwed up. As you know, garbage in...garbage out.

<<You are saying that when the parent dies, the property is 100% includable in the parent's taxable estate, despite the earlier gift tax return filing.>>

Absolutely correct...assuming a taxable estate and also assuming that the surviving JT was not a spouse.

<< In my example, the house has grown to a value of $300,000. So, a further $300,000 of the unified credit is used up. Therefore, the total amount of the unified credit that has been used is $400,000 (or $390,000), on a house that was never worth more than $300,000. Can this possibly be right?>>

And this is where I got tripped up before. So I'll give you my own example.

House with FMV of $100k
Dad "gifts" half of the house to son (non-spouse) for $50k
House is now worth $300k
Dad dies
Dad will include $300k in his estate...the total value of the property at his death. Why? Because the surviving JT did not furnish any consideration in his portion of the property.

As Chris pointed out in his previous post, this could result in the worst of all possible worlds: a taxable gift and the full inclusion of the FMV of the asset in the estate of the decedent.

Which is why you don't want to do it...unless you are directed to do so by a qualified estate planning pro...such as Chris.

If you would like to read more on these issues, go to Regs 25.2511 and 20.2040. It might really open your eyes.

TMF Taxes
Roy
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