Cannon Trust School Level II Practice Exam 2026 – All-in-One Guide to Master Your Level II Exam!

When property is owned as joint tenancy with rights of survivorship, the death of one owner causes the deceased’s interest to pass to the surviving owner. For tax purposes, the surviving owner’s basis in the property is stepped up to the fair market value at the date of death for the portion that passes to them. In practice, this means the surviving co-owner takes a basis equal to the property’s market value at death, rather than the decedent’s original cost.

Apply this to each property:

- The home is held JTWROS with the spouse, so upon the decedent’s death the spouse becomes the sole owner. The basis for the home to the spouse is the fair market value at death, which is 520,000.

- The rental property is held JTWROS with the son, so the son becomes the sole owner. The basis for the rental to the son is the fair market value at death, which is 150,000.

Thus, the cost bases to the beneficiaries are 520,000 for the home and 150,000 for the rental.