899 / What are the federal gift tax implications of taking title to investment property in joint names?

“If A creates a joint bank account for himself and B (or a similar type of ownership by which A can regain the entire fund without B’s consent), there is a gift to B when B draws upon the account for his own benefit, to the extent of the amount drawn without any obligation to account for a part of the proceeds to A. Similarly, if A purchases a United States savings bond, registered as payable to ‘A or B,’ there is a gift to B when B surrenders the bond for cash without any obligation to account for a part of the proceeds to A.”¹ Likewise, “where A, with his separate funds, creates a joint brokerage account for himself and B, and the securities purchased on behalf of the account are registered in the name of a nominee of the firm, A has not made a gift to B, for federal gift tax purposes, unless and until B draws upon the account for his own benefit without any obligation to account to A. If B makes a withdrawal under such circumstances, the value of the gift by A would be the sum of money or the value of the property actually withdrawn from the account by B.”² Thus, the creation of a joint account or similar type of ownership by itself, does not constitute a completed transfer from the creator and sole contributor if the creator and sole contributor can regain the existing account without the joint owner’s
consent.

“If A with his own funds purchases property and has the title conveyed to himself and B as joint owners, with rights of survivorship (other than a joint ownership described in [the foregoing paragraph]) but which rights may be defeated by either party severing his interest, there is a gift to B in the amount of half the value of the property.”³

Where A purchases and registers U.S. Treasury notes in the names of “A or B or survivor” in a jurisdiction in which this registration creates a joint tenancy, there is a completed gift of the survivorship rights in the notes and an undivided one-half interest in the interest payments and redemption rights pertaining to the notes. In a jurisdiction in which a joint tenancy is not created by such registration, there is a gift of the survivorship rights in the interest payments and in the notes at maturity.⁴ Computation of the value of the gifts in both situations is set forth in Revenue Ruling 78-215.