Tim and Sammy (husband and wife) bought a house for $500,000 in California using Tim’s salary and they owned it as Community Property with Right of Survivorship. They lived in this house for many years. Tim died when the property was worth $1 million.
1. What percentage of interest does each of them own?
2. How much is the taxable gift?
3. If Tim dies, will his share pass to Sammy automatically? Why?
4. What is the amount that will be included in Tim’s gross estate?
5. What is Sammy’s cost basis of the property now after Tim’s death?
6. If Sammy sells the property for $1.5 million after Tim’s death. How much is her taxable capital gain on this transaction? How much is the capital gain tax assuming her income tax rate is 39.6%?