Our club is located in Washington state which is a community
property state. The spouse of one of our partners died in
2022. In a community property state, when either spouse
dies the total value of the community property at the date
of death becomes the basis of the entire property.
The new tax basis of the surviving spouse becomes the FMV at
the date of death.
How can this adjustment in the tax basis of the surviving
spouse be made through Bivio?
The partnership needs to make a valid 754 election and we
can do that when filing our partnership return.
John W Ranby Trustee PGM Cariboo Trust on
Hi Linda:
First, let me begin by saying that I am not an expert on
Washington state community property law. However, I do live
in a community property state (AZ).
Having said that, I believe you may have misstated the tax
treatment slightly. Instead of the basis of both the
decedents' share and the surviving spouse's share increasing
to FMV, it is only the decedents' share that increases.
For example, if the initial basis for each spouse is $50 so
the total basis in the investment club partnership is $100,
and when the first spouse dies the total value of their
interest in the partnership is $200; then the survivor's
basis remains $50 and the basis of the decedent's is $100.
If the surviving spouse inherits the partnership interest,
then the blended basis is $150. If the decedent's share is
inherited by a third party, then the club would need to
follow the partnership agreement regarding how to process
it, and the surviving spouse would continue as a member with
a basis of $50.00.
I suggest you contact bivio support directly to determine
the best way to adjust the partnership basis of the
surviving spouse, if they inherited the decedent's share.
Jack Ranby, Treasurer, Grants Partners
Peter Dunkelberger on
John--it seems that you have inferred that both spouses are members. That was not clear to me from Ms. Holt's initial email.
Peter Dunkelberger
On Wed, Jan 11, 2023 at 11:00 AM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Hi Linda:
First, let me begin by saying that I am not an expert on
Washington state community property law. However, I do live
in a community property state (AZ).
Having said that, I believe you may have misstated the tax
treatment slightly. Instead of the basis of both the
decedents' share and the surviving spouse's share increasing
to FMV, it is only the decedents' share that increases.
For example, if the initial basis for each spouse is $50 so
the total basis in the investment club partnership is $100,
and when the first spouse dies the total value of their
interest in the partnership is $200; then the survivor's
basis remains $50 and the basis of the decedent's is $100.
If the surviving spouse inherits the partnership interest,
then the blended basis is $150. If the decedent's share is
inherited by a third party, then the club would need to
follow the partnership agreement regarding how to process
it, and the surviving spouse would continue as a member with
a basis of $50.00.
I suggest you contact bivio support directly to determine
the best way to adjust the partnership basis of the
surviving spouse, if they inherited the decedent's share.
Jack Ranby, Treasurer, Grants Partners
ira smilovitz on
The rules on basis adjustment vary by state for the community property states. Soá¹e adjust the total basis of the community property, some only half. I don't know the specifics for WA, but I suspect Linda (the OP) knows the correct rule for WA.
bivio support staff can make the basis adjustments. However, I don't believe a 754 election is necessary, nor advantageous. The election doesn't change the total tax that will be incurred by the club's members over the life of the club, it only affects the timing of those taxes. In order to make the election, the cost basis of each lot of each stock the club owned on the effective date of the election (the valuation date for the member basis adjustment) would need to be adjusted, up or down. I would expect that this would be work done via the Concierge service at significant cost. Note that once you make the election, you will need to make adjustments every time a member makes a withdrawal.
I don't recall the last time I heard of a club making the election when a member died or left the club.
John--it seems that you have inferred that both spouses are members. That was not clear to me from Ms. Holt's initial email.
Peter Dunkelberger
On Wed, Jan 11, 2023 at 11:00 AM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Hi Linda:
First, let me begin by saying that I am not an expert on
Washington state community property law. However, I do live
in a community property state (AZ).
Having said that, I believe you may have misstated the tax
treatment slightly. Instead of the basis of both the
decedents' share and the surviving spouse's share increasing
to FMV, it is only the decedents' share that increases.
For example, if the initial basis for each spouse is $50 so
the total basis in the investment club partnership is $100,
and when the first spouse dies the total value of their
interest in the partnership is $200; then the survivor's
basis remains $50 and the basis of the decedent's is $100.
If the surviving spouse inherits the partnership interest,
then the blended basis is $150. If the decedent's share is
inherited by a third party, then the club would need to
follow the partnership agreement regarding how to process
it, and the surviving spouse would continue as a member with
a basis of $50.00.
I suggest you contact bivio support directly to determine
the best way to adjust the partnership basis of the
surviving spouse, if they inherited the decedent's share.
Jack Ranby, Treasurer, Grants Partners
LINDA HOLT on
Thank you for the informative responses.
Do I call Bivio support staff for help with the basis adjustment?
Linda
On 01/11/2023 9:57 AM ira smilovitz via bivio.com <user*2883400001@bivio.com> wrote:
The rules on basis adjustment vary by state for the community property states. Soṁe adjust the total basis of the community property, some only half. I don't know the specifics for WA, but I suspect Linda (the OP) knows the correct rule for WA.
bivio support staff can make the basis adjustments. However, I don't believe a 754 election is necessary, nor advantageous. The election doesn't change the total tax that will be incurred by the club's members over the life of the club, it only affects the timing of those taxes. In order to make the election, the cost basis of each lot of each stock the club owned on the effective date of the election (the valuation date for the member basis adjustment) would need to be adjusted, up or down. I would expect that this would be work done via the Concierge service at significant cost. Note that once you make the election, you will need to make adjustments every time a member makes a withdrawal.
I don't recall the last time I heard of a club making the election when a member died or left the club.
John--it seems that you have inferred that both spouses are members. That was not clear to me from Ms. Holt's initial email.
Peter Dunkelberger
On Wed, Jan 11, 2023 at 11:00 AM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Hi Linda:
First, let me begin by saying that I am not an expert on
Washington state community property law. However, I do live
in a community property state (AZ).
Having said that, I believe you may have misstated the tax
treatment slightly. Instead of the basis of both the
decedents' share and the surviving spouse's share increasing
to FMV, it is only the decedents' share that increases.
For example, if the initial basis for each spouse is $50 so
the total basis in the investment club partnership is $100,
and when the first spouse dies the total value of their
interest in the partnership is $200; then the survivor's
basis remains $50 and the basis of the decedent's is $100.
If the surviving spouse inherits the partnership interest,
then the blended basis is $150. If the decedent's share is
inherited by a third party, then the club would need to
follow the partnership agreement regarding how to process
it, and the surviving spouse would continue as a member with
a basis of $50.00.
I suggest you contact bivio support directly to determine
the best way to adjust the partnership basis of the
surviving spouse, if they inherited the decedent's share.
The rules on basis adjustment vary by state for the community property states. Soá¹e adjust the total basis of the community property, some only half. I don't know the specifics for WA, but I suspect Linda (the OP) knows the correct rule for WA.
bivio support staff can make the basis adjustments. However, I don't believe a 754 election is necessary, nor advantageous. The election doesn't change the total tax that will be incurred by the club's members over the life of the club, it only affects the timing of those taxes. In order to make the election, the cost basis of each lot of each stock the club owned on the effective date of the election (the valuation date for the member basis adjustment) would need to be adjusted, up or down. I would expect that this would be work done via the Concierge service at significant cost. Note that once you make the election, you will need to make adjustments every time a member makes a withdrawal.
I don't recall the last time I heard of a club making the election when a member died or left the club.
John--it seems that you have inferred that both spouses are members. That was not clear to me from Ms. Holt's initial email.
Peter Dunkelberger
On Wed, Jan 11, 2023 at 11:00 AM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Hi Linda:
First, let me begin by saying that I am not an expert on
Washington state community property law. However, I do live
in a community property state (AZ).
Having said that, I believe you may have misstated the tax
treatment slightly. Instead of the basis of both the
decedents' share and the surviving spouse's share increasing
to FMV, it is only the decedents' share that increases.
For example, if the initial basis for each spouse is $50 so
the total basis in the investment club partnership is $100,
and when the first spouse dies the total value of their
interest in the partnership is $200; then the survivor's
basis remains $50 and the basis of the decedent's is $100.
If the surviving spouse inherits the partnership interest,
then the blended basis is $150. If the decedent's share is
inherited by a third party, then the club would need to
follow the partnership agreement regarding how to process
it, and the surviving spouse would continue as a member with
a basis of $50.00.
I suggest you contact bivio support directly to determine
the best way to adjust the partnership basis of the
surviving spouse, if they inherited the decedent's share.
Jack Ranby, Treasurer, Grants Partners
John W Ranby Trustee PGM Cariboo Trust on
Peter:
In a community property state, if the money contributed to
the partnership is "community property"; then the equity in
that partnership is a community asset, whether only one or
both spouses are "members." Unless the funds used to buy
units in the partnership are separate property acquired
before marriage, inherited, or designated separate by a
pre-nuptial agreement, all moneys acquired during the
marriage are community property and any asset bought with
those funds is community property.
So unless separate property funds are used, the units in an
investment club partnership will be community property
whether one or both spouses are "members." If only one
spouse is a "member", that person is deemed the agent for
the community.
That is why I did not enquire whether both spouses were
members in Linda's situation.
Linda Glein on
I live in Washington, been in three investment clubs during the years and had several members pass away. This has never come up.
Calculate the member's value. Turn the funds over to the Executor. They will handle the distribution of the funds and any valuation details. It is not the place of the investment club to determine who gets what and how it is valued thereafter.
A Different Linda
On Wed, Jan 11, 2023 at 3:59 PM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Peter:
In a community property state, if the money contributed to
the partnership is "community property"; then the equity in
that partnership is a community asset, whether only one or
both spouses are "members." Unless the funds used to buy
units in the partnership are separate property acquired
before marriage, inherited, or designated separate by a
pre-nuptial agreement, all moneys acquired during the
marriage are community property and any asset bought with
those funds is community property.
So unless separate property funds are used, the units in an
investment club partnership will be community property
whether one or both spouses are "members." If only one
spouse is a "member", that person is deemed the agent for
the community.
That is why I did not enquire whether both spouses were
members in Linda's situation.
I live in Washington, been in three investment clubs during the years and had several members pass away. This has never come up.
Calculate the member's value. Turn the funds over to the Executor. They will handle the distribution of the funds and any valuation details. It is not the place of the investment club to determine who gets what and how it is valued thereafter.
A Different Linda
On Wed, Jan 11, 2023 at 3:59 PM John W Ranby Trustee PGM Cariboo Trust via bivio.com <user*15792700001@bivio.com> wrote:
Peter:
In a community property state, if the money contributed to
the partnership is "community property"; then the equity in
that partnership is a community asset, whether only one or
both spouses are "members." Unless the funds used to buy
units in the partnership are separate property acquired
before marriage, inherited, or designated separate by a
pre-nuptial agreement, all moneys acquired during the
marriage are community property and any asset bought with
those funds is community property.
So unless separate property funds are used, the units in an
investment club partnership will be community property
whether one or both spouses are "members." If only one
spouse is a "member", that person is deemed the agent for
the community.
That is why I did not enquire whether both spouses were
members in Linda's situation.