Although, joint tenancy will avoid probate, holding property as joint tenants may also have adverse and unexpected consequences. First, a little primer on basis to understand what is meant when we speak about your basis in property.
Generally, your basis in property is what you paid for it when you acquired the property. For purposes of this discussion and to keep things simple, we will not address the adjusted basis which is determined when you consider gain or loss such as capital improvements or depreciation, respectively, to the property.
If you paid $100,000.00 for real property, your basis in that property would be $100,000.00. If you later sold it for $250,000.00, you would realize a gain of $150,000 that, ignoring any exclusions or exemptions that may be available, would be subject to taxation. Similarly, If someone gifted you that same property during their lifetime, your basis in the property would be the same as the person gifting it to you. If they paid $100,000.00 for the property and gave it to you when it’s fair market value was $250,000.00, your basis would be $100,000.00 and if you sold it for $250,000.00, you would have a taxable gain of $150,000.00. Again, for demonstration purposes we are not taking into account any state or federal exemptions or exclusions available such as those under IRC section 121.