A married couple in California wants to take title to a home in a way that allows the surviving spouse to inherit the other's interest outside of probate AND receive the most favorable income tax treatment on the property's cost basis at death. Which form of ownership best satisfies both goals?
Correct Answer
C) Community property with right of survivorship
Community property with right of survivorship (CPWROS), authorized under California Civil Code §682.1, is the only form of ownership that simultaneously provides automatic survivorship transfer outside probate AND a full stepped-up tax basis on the entire property upon the first spouse's death. This means the surviving spouse's cost basis is reset to fair market value on both halves of the property, minimizing capital gains exposure if the property is later sold.
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Under California's community property laws, which of the following is MOST likely to be classified as community property rather than separate property?
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Angela, a homeowner in California, has declared a homestead exemption on her primary residence. She owes $30,000 in unpaid federal income taxes. Can the IRS force the sale of her homesteaded property to satisfy the tax lien?