The implications of a girl of property in JTROS is dependent upon whether the donor retains an interest in the asset as one of the joint tenants.
As a result, the remaining two children each possess a 50% undivided interest in the JTROS with a basis of $13,000 ($3,000 original basis plus 50% ($20,000).
Analysis takes a different turn where a donor transfers an asset and subsequent events related to the asset result in the donor being a JTROS. The major rule of importance in these instances is the tracing rule of IRC section 2040.
An example of the rule is where a father acquires an asset and transfers it to JTROS naming himself and child as JTs.
Another scenario arises where a gift of an asset is made to another, followed by the donee placing the asset in JTROS or using the funds given to acquire property in JTROS, with the donor being one of the JTs.
There is a different result when the donee earns income on the asset given or sells it for gain with the proceeds being used to acquire property in JTROS. In such event, the original donee is considered to have made a contribution to the acquisition of the asset.
The proceeds are then used to acquire other real property for $20,000 that is taken in JTROS with father.
A longstanding issue concerning qualified disclaimers of an interest in JTROS involves the start of the disclaimer period.
Pursuant to the regulations, the beginning of the disclaimer period is dependent upon whether the JTROS is amenable to unilateral severance.
Example: Husband and wife hold all of their assets in JTROS between them.
Where a JT has outstanding debts, a question may arise as to the rights of creditors to seek collection from the interest held in the JTROS. In certain instances, the execution of such lien may result in the JTROS being converted to a tenancy in common.