A. Karolina and Jackson bought their Del Mar house in 2000 for $2,000,000 to be used as their residence. Karolina paid $500,000 and Jackson paid $1,500,000. When Jackson died in a surfing accident in January of 2024, the Fair Market Value (FMV) of the house was $7,000,000.
Answer the following questions depending on Karolina’s and Jackson’s relationship and title holding. Make sure that each scenario 1.- 4. has a. and b. and possibly c. answer.
a. How much is included in Jackson’s estate? Please show your calculations.
b. What is Karolina’s new basis? Please show your calculations.
c. Only applicable to problem 1: What is Jackson’s daughter’s basis?
1. Karolina and Jackson are brother and sister, and they took title as tenants in common 25%-75%. Jackson’s daughter is a beneficiary of his share. Karolina keeps her share.
a.
b. Karolina’s basis:
c. Jackson’s daughter’s basis:
2. Karolina and Jackson are husband and wife, and they took title as joint tenants with the right of survivorship.
a.
b.
3. Karolina and Jackson are husband and wife, and they took title as community property with the right of survivorship
a.
b.
4. Karolina and Jackson are friends, and they took title as joint tenants with the right of survivorship. Assume that Jackson had other assets and his estate will be subject to 40% estate tax.
a.
b.
B. In problem 4. above, the attorney dealing with Jackson’s estate realized that Jackson left a will stating that his daughter is to inherit his half of the Del Mar property that he held jointly with Karolina. Please indicate who will inherit Jackson’s share of the property and explain why.