Since 2001 (and 2003 for domestic partners), California probate law has introduced Community Property with Right of Survivorship (CPWROS). When real property is held in CPWROS, the property passes to the surviving partner or spouse automatically. And the entire property is stepped up in basis value. This means that no capital gains tax is due when the surviving spouse or partner sells the property. Keep in mind that this applies at a price not exceeding the market value at the time of the decedent’s death.
In a joint tenancy title, only the decedent’s part of the property would be revalued (stepped up) at the market value on the date of death, leaving the surviving spouse or partner with a taxable capital gain on his or her part of the property should he or she decide to sell the property.