J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

6.9 Joint Ownership Interests

The change to a tenancy in common from a joint tenancy is tax free. You may convert a joint tenancy in corporate stock to a tenancy in common without income-tax consequences. The transfer is tax free even though survivorship rights are eliminated. Similarly, a partition and issuance of separate certificates in the names of each joint tenant is also tax free.

A joint tenancy and a tenancy in common differ in this respect. On the death of a joint tenant, ownership passes to the surviving joint tenant or tenants. But on the death of a tenant holding property in common, ownership passes to his or her heirs, not to the other tenant or tenants with whom the property was held.

A tenancy by the entirety is a form of joint ownership recognized in some states and can be only between a husband and wife.

Dividing properties held in common.

A division of properties held as tenants in common may qualify as tax-free exchanges.

For example, three men owned three pieces of real estate as tenants in common. Each man wanted to be the sole owner of one of the pieces of property. They disentangled themselves by exchanging interests in a three-way exchange. No money or property other than the three pieces of real estate changed hands, and none of the men assumed the others’ liability. The transactions qualified as tax-free exchanges and no gain or loss was recognized.

Receipt of boot.

Exchanges of jointly owned property are tax free as long as no “boot,” such as cash or ...