Estates Ch 3 Types of Property Flashcards

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1
Q

Tenancy in common is only available for married couples.

a. True b. False

A

false

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2
Q

A tenancy in common can be severed without the permission of all of the tenants in common.

a. True b. False

A

True

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3
Q

Property acquired by gift, by inheritance, or before the marriage can retain its separate property status even in a community property state.

a. True b. False

A

a. True

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4
Q

If separate property is commingled with community property to the extent that it cannot be traced as separate, the property is automatically deemed community property.

a. True b. False

A

True

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5
Q

Which of the following statements regarding joint tenancy with right of survivorship is correct?

a. Each tenant may bequeath their interest in the property at their death.
b. Joint tenancy with right of survivorship is the same as community property.
c. Only spouses can establish joint tenancies.
d. Each tenant under a joint tenancy with right of survivorship has an undivided interest in the property

A

The correct answer is d.

Only option d is a correct statement. Option a is incorrect because a joint tenant in a JTWROS can transfer his or her interest during life, but at death the interest is automatically transferred to the
surviving tenants.

Option b is incorrect because JTWROS is not the same as community property. Community property can only be entered into between married couples and does not provide an
automatic right of survivorship.

Option c is incorrect because anyone can own property JTWROS, and at the death of one joint tenant, his or her interest will transfer automatically to the surviving joint tenants

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6
Q

Of the following types of ownership, which is available for married couples?
1. Tenancy by the entirety.
2. Tenancy in common.
3. JTWROS.
4. Tenants by marriage.

a. 1 only.
b. 1 and
3. c. 1, 2, and
3. d. 1, 2, 3, and 4.

A

The correct answer is c.

Of the property types listed, tenancy by the entirety is an ownership form exclusive to married couples.
Tenants in common and JTWROS are available to anyone, including married couples. Tenants by marriage
is not a form of property ownership.

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7
Q

Which of the following statements regarding sole ownership is not true?

a. Sole ownership is the complete individual ownership of property with all rights associated with outright ownership.
b. Property owned solely passes through probate at the death of the owner.
c. Property owned as sole ownership is excluded from the federal gross estate of the owner.
d. Sole ownership allows the owner to use, sell, gift, alienate, convey or bequeath the property without others’ approval

A

The correct answer is c.

The question asked what is not true regarding property owned as sole ownership. Property owned as sole ownership is included in the gross estate of the decedent. All of the other statements regarding
property owned solely are true.

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8
Q

Syngin travels quite often and wants his daughter to have access to his checking account while he is out of town. For this reason, on October 3, 2016, Syngin deposited $100,000 in a checking account. Several years passed and Syngin used the funds for normal living expenses, but his daughter never accessed any of the funds. Recently, on May 2 of this year, Syngin’s daughter needed an extra $35,000 to purchase the car of her dreams so she made a withdrawal from the account with full intentions of reimbursing the account.
At what date has Syngin made a gift to his daughter?

a. October 3, 2016 (the date of the creation of the account).
b. December 31, 2016 (the end of the year in which the account was established).
c. May 2 of this year.
d. May 31 of this year.

A

The correct answer is c.

In the situation of a joint interest in a bank account, the contributing joint account owner is not deemed
to have made a gift until the non-contributing joint account owner makes a withdrawal for their own
benefit. In this case, Syngin’s daughter did not make a withdrawal until May 2 of this year

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9
Q

Cora is planning to purchase a vacation home and would like to ensure that upon her death, her non-spouse life partner, Rebel, can live on the property for the remainder of Rebel’s life. At Rebel’s death, Cora would like to be assured that the property will transfer to Cora’s only child, Wilson. Which of the following is most likely to accomplish Cora’s goals?

a. Joint tenants in common with Cora, Rebel, and Wilson as equal joint tenants.
b. Tenancy by the entirety with Rebel; with a bequest of the property to Wilson in Cora’s will.
c. Joint tenancy with right of survivorship with Cora, Rebel, and Wilson as equal owners.
d. A life estate granted to Rebel, with Wilson as the remainderman.

A

The correct answer is d.

Option a is incorrect because, upon Cora’s death, Rebel will own 1/3 of the property, and, assuming Cora leaves her 1/3 of the property to Wilson, Wilson will own 2/3 of the property.

There is no guarantee that Rebel and Wilson will be in agreement regarding Rebel living on the property.

Furthermore, Rebel’s 1/3 of the property will transfer via the probate process at Rebel’s death, to the person of Rebel’s choosing
(who may not be Wilson).

Option b is incorrect because tenancy by the entirety is available only for married couples (also note that, if it were available, TE does not pass through probate, so the bequest to Wilson in Cora’s will accomplishes nothing). Option c is incorrect because, upon Cora’s death, Rebel and Wilson would automatically become 1/2 owners. As with option a, there is no guarantee that they will agree upon Rebel living on the property. In addition, the property can be severed during lifetime so there is no guarantee that Wilson will ultimately own the property. The method that will assure Cora’s goals
are reached is to grant a life estate to Rebel with Wilson as the remainderman.

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10
Q

At the death of either partner, an unmarried couple would like to ensure that all property, insurance policies, and retirement plans transfer to the surviving partner. Which of the following will not accomplish the couple’s goal?

Each partner is listed as the beneficiary of the other partner’s life insurance policy.

Each partner is listed as the beneficiary of the other partner’s qualified pension plan.

Each partner is a joint tenant in all of the couple’s property owned joint tenancy with rights of survivorship.

State intestacy laws.

A

State intestacy laws.
Rationale

State intestacy laws usually do not provide for asset transfers to non-related parties, including the surviving partner of an unmarried couple. The designated beneficiary of a life insurance policy will receive the proceeds of the life insurance policy by state contract law. The designated beneficiary of a qualified pension plan will also receive the assets by state contract law. A joint tenant of property held JTWROS will also receive the decedent joint tenant’s interest per the state contract law.

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11
Q

Sandy, who is 75 years old, owns a beautiful home in Palm Beach. She has been dating a younger man named Danny. While drafting her will, she decides to leave Danny an interest in her home for a period of three years. Sandy believes that three years is enough time for Danny to find alternative living arrangements. After the three-year period, the property will transfer to her two grandchildren, Marty and Sonny.

What type of interest has Sandy left Danny?

Life Estate.
Usufruct.
Periodic Interest.
Term Interest.

A

Term Interest.
Rationale

A term interest lasts for a specific period of time, such as three years. A life estate and a usufruct last for the term of a person’s life.

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12
Q

Arnold and Willis agree to purchase a condo at the beach for $200,000 as tenants in common. Willis will contribute $150,000 of the price, and Arnold will contribute the remaining $50,000. They have agreed to split all income and expenses at 75%/25%, the same as their ownership percentages.

What is the gift from Willis to Arnold for the year relating to this property?

$0.
$50,000.
$150,000.
$200,000.

A

$0.
Rationale

Willis is not deemed to have made a gift to Arnold relating to this property because they have contributed amounts equal to their ownership percentages. When the property is owned tenancy in common, a gift occurs if one tenant in common owns a greater proportional share than his pro rata contribution. In this case, Arnold and Willis contributed amounts equal to their proportional share

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13
Q

three years ago, Jack and Diane, a married couple, agreed to purchase some real property and titled it as joint tenants with right of survivorship. At the time of the purchase, Diane did not have any cash, so Jack paid the $50,000 purchase price himself. Over the next five years, Jack and Diane allocated the income and expenses of the property equally, and luckily for them the value of the property increased to $350,000.

If Jack dies this year, how much will his executor include in his federal gross estate as the value of this real property?

$50,000.
$175,000.
$300,000.
$350,000.

A

$175,000.
Rationale

When a married couple owns property joint tenancy with right of survivorship, there is an automatic assumption that each spouse contributed 50% to the original purchase price.

In this case, the contribution rule will deem that each would include 50% of the value of the property in the decedent’s federal gross estate.

At Jack’s death, his executor will include 50% of the value of the property or $175,000 (50% x $350,000) in Jack’s federal gross estate.

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14
Q

Twenty-two years ago, Neil and Patrick began dating, and 19 years ago, they began living together. Last year, Neil inherited over $9,000,000 from his grandfather. He wants to ensure that if he dies first, Patrick will be taken care of for the rest of his life. Despite your insistence, Neil does not have a will, and you have advised him previously that state intestacy laws may not protect non-married partners.

Which of the following asset ownership options would fulfill Neil’s goal of transferring assets to Patrick at his death?

Community property.
Tenancy in common with each other.
Joint tenancy with rights of survivorship.
Tenancy by the entirety

A

Joint tenancy with rights of survivorship.
Rationale

When one owner dies owning property held as a joint tenancy with the right of survivorship, his interest is transferred to the other remaining property owners. In this case, if Neil and Patrick own property JTWROS, Patrick will inherit Neil’s interest in the property if Neil dies first.
When property is owned JTWROS, the property does not pass through probate and the transfer is automatic at death. Neil and Patrick cannot own property via community property or tenancy by the entirety unless they are married. Tenancy in common does not have an automatic survivorship feature and would not accomplish Neil and Patrick’s goals.

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15
Q

Erica has come to you for estate planning advice. She has been in a long-term relationship with Jude, but they are not married. Because Erica’s family is not aware of the relationship between Jude and Erica, Erica is concerned that at her death, Jude will be overlooked by Erica’s family.
Of the following recommendations, which would you least likely recommend to fulfill Erica’s goal of transferring assets to Jude at Erica’s death?

Transfer the ownership of Erica’s real estate investments into tenancy by the entirety.

Name Jude as the beneficiary of Erica’s retirement plan.

Advise Erica against creating a will, specifically bequeathing her property to Jude.

Name Jude as the beneficiary of Erica’s life insurance policy.

A

Transfer the ownership of Erica’s real estate investments into tenancy by the entirety.
Rationale

As Erica’s financial planner, you would not advise her to transfer the ownership of her property to a tenancy by the entirety as it is an ownership option only available to married individuals.

You would advise Erica to name Jude as the beneficiary of her retirement plans and life insurance policies as the beneficiary designation would ensure payment of the proceeds to Jude without the delay of probate and challenges to the will. Advising Erica to create a will and specifically bequeath assets to Jude would fulfill Erica’s goal of transferring her assets to Jude, but it also allows for Erica’s family to challenge the will.

A challenge to the will may create delays, increase the costs of estate administration, and potentially could cause the assets to be distributed to someone other than Jude

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16
Q

Which of the following is/are considered real property?

  1. Stocks
  2. Automobile
  3. House
  4. Land held for investment

3 only.
1 and 2.
3 and 4.
1, 2 and 3

A

3 and 4.
Rationale

Real property is land and anything permanently attached to the land (e.g., buildings). The nature of the property in the hands of the owner (investment, personal, inventory) does not affect the type of property. Stocks are intangible personal property and automobiles are tangible personal property.

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17
Q

Which of the following statements regarding joint tenancy is correct?

Joint tenancies may only be established between spouses.

Tenancy by the entirety is a special form of joint tenancy only available to residents of Louisiana.

Joint tenancies can only be severed with the permission of a court.

Each joint tenant in a joint tenancy has an undivided, equal interest in the property.

A

Each joint tenant in a joint tenancy has an undivided, equal interest in the property.
Rationale

Each joint tenant in a joint tenancy owns an equal, undivided interest in the property. Option a is false because joint tenancies can be established by any persons, related or unrelated. Option b is false because tenancy by the entity is available in other states. Option c is false because joint tenancies can be partitioned at the request of one joint tenant. Court approval is not required to sever a joint tenancy.

18
Q

Vince has been married to Lisa for six years. They are about to buy their first home and have come to you with some questions that they have regarding titling of the home. In your explanation of the different property ownership arrangements, which of the following titling structures can only be entered into by spouses?

Tenancy by the entirety.
Tenancy in common.
Joint tenancy with rights of survivorship.
Sole ownership

A

Tenancy by the entirety.
Rationale

Of the property ownerships listed, tenancy by the entirety is the only one limited to married couples.

19
Q

which of the following statements regarding joint tenancy with rights of survivorship is correct?

Each tenant may bequeath their interest in the property at their death.

Joint tenancy with rights of survivorship is the same as community property.

Only spouses can establish joint tenancies.

Each tenant under a joint tenancy with rights of survivorship has an undivided interest in the property.

A

Each tenant under a joint tenancy with rights of survivorship has an undivided interest in the property.
Rationale

Only option d is a correct statement. Option a is incorrect because a joint tenant in a JTWROS can transfer their interest during life, but at death the interest is automatically transferred to the surviving tenants. Option b is incorrect because JTWROS is not the same as community property. Community property can only be entered into between married couples and does not provide an automatic right of survivorship. Option c is incorrect because anyone can own property JTWROS, and at the death of one joint tenant, their interest will transfer automatically to the surviving joint tenants.

20
Q

Three years ago, brothers Zach and Cody, purchased real property and titled it as joint tenancy with right of survivorship. At the time of the purchase, Zach did not have any cash, so Cody paid the $50,000 purchase price himself. Over the next five years, Zach and Cody allocated the income and expenses of the property equally, and luckily for them the value of the property increased to $350,000.

If Cody dies this year, how much will his executor include in his federal gross estate as the value of this real property?

$50,000.
$175,000.
$300,000.
$350,000.

A

$350,000.
Rationale

The contribution rule applies to property owned as a joint tenancy with right of survivorship. Because Zach did not contribute any amount towards the original purchase price of the property, Cody’s executor must include the full fair market value of the property in Cody’s gross estate for federal estate tax purposes.

21
Q

Which of the following is/are considered tangible personal property?

  1. Stocks
  2. Automobile
  3. Rental house
  4. Land

2 only.
1 and 2.
3 and 4.
1, 2, 3, and 4

A

2 only.

22
Q

Which of the following is/are considered intangible personal property?

  1. Stocks
  2. Patents
  3. Bonds
  4. Land held for investment

4 only.
1 and 2.
2 and 4.
1, 2, and 3.

A

1, 2, and 3.
Rationale

Realty is not intangible personal property. Stocks, bonds, patents, and copyrights are common examples of intangible personal property. Land held for investment is real property.

23
Q

Which of the following statements regarding sole ownership is not true?

Sole ownership is the complete individual ownership of property with all rights associated with outright ownership.

Property owned as solely passes through probate at the death of the owner.

Property owned as sole ownership is excluded from the federal gross estate of the owner.

Sole ownership allows the owner to use, sell, gift, alienate, convey or bequeath the property without others’ approval.

A

Property owned as sole ownership is excluded from the federal gross estate of the owner.

Rationale

The question asked what is NOT true regarding property owned as sole ownership. Property owned as sole ownership is included in the gross estate of the decedent. All of the other statements regarding property owned fee simple are true.

24
Q

All of the following statements concerning community property are correct, except?

If one spouse inherits property during the marriage, that property is generally not considered community property.

Assets acquired by either spouse before marriage generally become community property upon their marriage.

Community property assets are included in probate.

If one spouse utilizes his paycheck from work performed during the marriage to purchase property, the property is community property.

A

Assets acquired by either spouse before marriage generally become community property upon their marriage.
Rationale

Option b is the only incorrect statement because assets acquired before marriage remain separate property.

25
Q

Will and Jada have lived in Arizona since their marriage. Jada received an inheritance from her father during their marriage. Will and Jada are moving to Massachusetts for a new job and have some questions regarding their move to a common law (separate property) state from a community-property state. Which of the following statements is correct?

When a couple moves from a community-property state to a common law (separate property) state, separate property will generally remain separate property.

When a couple moves from a common law (separate property) state to a community-property state, separate property will generally become community property.

Community property avoids probate at the death of the first spouse and automatically passes to the surviving spouse by operation of law.

To get the step-to fair market value in basis at the death of the first spouse, a couple who lives in a common law (separate property) state can elect to treat their separate property as community property.

A

When a couple moves from a community-property state to a common law (separate property) state, separate property will generally remain separate property.

Rationale

Option a is the only correct statement. When a couple moves from a community property state to a common law (separate property) state, separate property will generally remain separate property.

Option b is incorrect because separate property does not generally become community property when a married couple moves from a common law state to a community property state.

Option c is incorrect because community property may be disposed of by will and does not automatically pass to the surviving spouse by operation of law. F

inally, option d is incorrect because couples living in common law states cannot elect community property treatment at the death of the first spouse in order to get a step-up in basis

26
Q

All of the following statements concerning joint tenancy with rights of survivorship are correct, except:

At the death of a joint tenant, the deceased tenant’s interest in the property will transfer to the beneficiary listed in the deceased tenant’s will.

Property owned JTWROS transfers by operation of law.

Each tenant owns the same fractional share in the property.

During his life, each joint tenant has the right to sever his interest in the property without consent of the other joint tenants.

A

At the death of a joint tenant, the deceased tenant’s interest in the property will transfer to the beneficiary listed in the deceased tenant’s will.

Rationale

Option a is the only incorrect statement because the property will pass to the surviving tenants by operation of law, without regard to any provisions contained in a will.

27
Q

Sandy, who is 75 years old, owns a beautiful home in Palm Beach. She has been dating a younger man named Danny. While drafting her will, she decides to leave Danny an interest in her home for the rest of his life. Sandy believes that Danny is incapable of providing his own home, so she wants him to have a home for the rest of his life. However, once Danny dies, she wants the property to pass to her great grandchildren, Marty and Sonny.

What type of interest has Sandy left Marty and Sonny?

Life Estate.
Usufruct.
Remainder Interest.
Term Interest.

A

Remainder Interest.
Rationale

A term interest lasts for a specific period of time, such as three years. A life estate and a usufruct last for the term of a person’s life (generally), such as what Sandy left Danny. Sandy’s great grandchildren have a remainder interest since their interest begins after the life estate ends.

28
Q

Dara has owned 100% of the stock of Dara’s Baked Goods, a corporation, for 22 years. In the current year, she gifted 50% of the business to her daughter, Sonia, who lives in California with her husband. Sonia does not work at the business and reinvests any income back in the company.
With respect to the transfer of the business interest, which of the following statements is correct?

Sonia’s 50% interest in Dara’s Baked Goods is community property, owned equally by Sonia and her husband.

If Sonia’s husband dies tomorrow, both his share of Dara’s Baked Goods and Sonia’s share of Dara’s Baked Goods would receive a step-to fair market value in basis.

Sonia’s owns 50% of Dara’s Baked Goods outright, and the interest will not be considered community property.

If Sonia dies tomorrow, the executor of her estate would include 25% of the value of Dara’s Baked Goods in her gross estate.

A

Sonia’s owns 50% of Dara’s Baked Goods outright, and the interest will not be considered community property.

Rationale

Option c is correct because gifted property is generally considered separate property. Option a is incorrect because gifted property is generally considered separate property unless Sonia elected to treat the property as community property (transmutation from separate property to community property), or commingled the assets. In this case, Sonia does not commingle the assets and the question does not mention that she elected community property status over the assets. Option b is incorrect because Sonia’s interest in Dara’s Baked Goods will not be included in her husband’s gross estate. Separate property is only included in the gross estate of the separate property owner. Because the interest is not in her husband’s gross estate, it does not receive a step-to fair market value. Option d is incorrect because if Sonia dies tomorrow she must include 100% of the value of all of her assets owned as separate property (thus 50% of Dara’s Baked Goods).

29
Q

Of the following types of ownership, which is available for married couples?

  1. Tenancy by the entirety
  2. Tenancy in common
  3. JTWROS
  4. Tenants by marriage

1 only.
1 and 3.
1, 2, and 3.
1, 2, 3, and 4.

A

1, 2, and 3.
Rationale

Of the property types listed, tenancy by the entirety is an ownership form exclusive to married couples. Tenants in common and JTWROS are available to anyone, including married couples. Tenants by marriage is not a form of property ownership.

30
Q

If Joanne died with the following property interests, which would not be included in her probate estate?

Community property.
Property held tenants in common.
Property held as tenant by the entirety.
Property owned sole ownership.

A

Property held as tenant by the entirety.
Rationale

All except option c are included in a decedent’s probate estate.

Property held as tenants by the entirety is not included in the decedent’s probate estate as it transfers by law, rather than by will

31
Q

100% of value is always included in gross estate

A.JTWROS and Tenancy by the Entirety
B.Tenancy in Common and JTWROS
C.Fee Simple
D.Tenancy by the Entirety and Community Property
A

Solution: The correct answer is C.

32
Q

Automatic survivorship feature

A.JTWROS and Tenancy by the Entirety
B.Tenancy in Common and JTWROS
C.Fee Simple
D.Tenancy by the Entirety and Community Property
A

Solution: The correct answer is A.

33
Q

Can partition property without consent

A.JTWROS and Tenancy by the Entirety
B.Tenancy in Common and JTWROS
C.Fee Simple
D.Tenancy by the Entirety and Community Property
A

Solution: The correct answer is B.

34
Q

value included in gross estate is 50% deemed contribution rule

A.JTWROS and Tenancy by the Entirety
B.Tenancy in Common and JTWROS
C.Fee Simple
D.Tenancy by the Entirety and Community Property
A

Solution: The correct answer is D.

The deemed contribution rule ALWAYS applies between spouses so it must be used for community property and TE since the marital relationship is a requirement of the ownership interest. JTWROS can be between spouses, and then it is assumed a 50% contribution rule too, BUT JTWROS can also be used by non-spouses and then the actual contribution rule applies

35
Q

Chris and Jenn, a married couple, made the following gifts this year:

Chris gave their son, Evan, a car worth $4,000 owned as community property. Chris also gave his son his stamp collection (separate property) valued at $60,000.

Chris gave his brother, Stephen, $20,000 of Chris’ separate property so Stephen could purchase a new home.

Chris gave his sister, Heather, $4,000 in cash from his and Jenn’s joint checking account which consists only of community property. He also gave Heather a piece of land he purchased before his marriage to Jenn, valued at $49,000.

After the gift, how is Evan’s ownership of the car classified?

A.Fee Simple
B.Joint Tenancy with Chris
C.Tenancy in Common with Chris and Jenn
D.Community Property with Evan’s wife Michelle
A

The correct answer is A.

The car is owned by Evan as fee simple. There is no indication that Chris or Jenn retained any interest in the car after the gift. Even though Evan is married, a gift to an individual would not be community property.

36
Q

Kate and her brother, Rustin, own a piece of property in Dallas as tenants in common valued at $50,000. Kate owns 75% and Rustin owns 25%. Rustin also owns a home in New Orleans, but the home is too expensive and Rustin defaulted on the loan. Even after the bank seized Rustin’s home in New Orleans, there was a $50,000 debt remaining.
Assuming the bank received a default judgment against Rustin and could seize the Dallas property, what portion of the property could be seized to satisfy Rustin’s debt?

A.0%
B.25%
C.50%
D.100%
A

Solution: The correct answer is B.

Co-owners of tenancy in common property are not liable for the debts of their co-owners. Thus, the bank can only seize Rustin’s portion of the property to satisfy his debt.

37
Q

Natalie and Ashley own farm land as Joint Tenants with Rights of Survivorship. Natalie contributed $60,000 and Ashley contributed $40,000. The land is currently valued at $1,000,000 and each of them own 50% of the property.
If Natalie died today, what amount of the value of the farm land is included in her gross estate?

A.$60,000
B.$500,000
C.$600,000
D.$1,000,000
A

Solution: The correct answer is C.

Property owned JTWROS follows the actual contribution rule for inclusion in the gross estate. Therefore, since Natalie contributed 60% of the property, her estate will include 60% of the Fair Market Value (60% × $1,000,000 = $600,000).

38
Q

Sylvia and Rachel are friends that own a townhouse together. Rachel contributed 40% of the purchase price and Sylvia contributed 60% of the purchase price. Each of them own 50% of the property. Which of the following are permissible ways they could title the property?

Fee Simple
Tenancy in Common
Joint Tenancy with Rights of Survivorship
Tenancy by the Entirety
Community Property

A.2 only
B.2 and 3
C.1, 3 and 4
D.2, 3 and 4
E.2, 3, 4 and 5
A

The correct answer is B.

The property could be titled either as Tenancy in Common or Joint Tenancy with Rights of Survivorship. The property could not be owned at Tenancy by the entirety or Community Property because Sylvia and Rachel are not married. Fee Simple is not an option either because there is more than one owner.

39
Q

Sherri purchased a home many years ago for $40,000. She married Gary five years ago when the house was worth $150,000. Sherri and Gary live in a community property state. Assume Sherri died today and gave her interest in the property to her son Casey. The property is currently valued at $200,000.

What is Gary’s basis in the home after Sherri’s death?

A.$0
B.$75,000
C.$100,000
D.$200,000
A

solution: The correct answer is A.

Gary does not own any interest in the property. Sherri purchased the home before she was married to Gary. At the time of marriage, the property remained Sherri’s separate property.

When Sherri died, her interest (100%) transferred to Casey.

hus, Gary does not own any of the property and does not have any basis in the property.

Casey will have a basis of $200,000.

40
Q
A