Does adding a joint owner on an account constitute a gift ? 
Treas. Reg. § 25.2511-1(h)(4) spells it out clearly: With bank accounts and most brokerage accounts that call for the registration of securities in “street name,” Dad will not have made a reportable gift if he simply adds Junior’s name as a joint owner. Reportable gift transfers occur only if Junior starts to draw funds from those accounts for his personal use (Revenue Ruling 69-148). But with other assets, including a business or even a personal residence, if Dad makes Junior a joint owner, a gift will be deemed to have occurred immediately, and a gift return will probably have to be filed for the year the joint tenancy was created (Treas. Reg. § 25.2511-1(h)(5)).

 Joint tenants with right of survivorship (JTWROS) Account:

       Are the owners spouses?

         Yes they are->

                Community property state? (AZ, CA, ID, LA, NV, NM, TX, WA WI)

->  100% step up  http://www.irs.gov/pub/irs-pdf/p555.pdf page 8

                      All other states?

 ->50% step up on all shares (the adjusted basis to the surviving spouse  is the average of the date of death value and the original cost) - Pub 551 page 9

For step up on joint account between spouses in a non-community property state: Morgan Stanley applies this by stepping up/down all the assets half way.  They do not accept stepping up just half the assets. For example, if the cost basis was $50 and the FMV at death was $100, it would be stepped up to $75.

            No they are not->

Step up is based on portion attributable to the decedent. A similar methodology is applied as to the step on the non-community JTWROS spouses. The percentage of assets attributable to the decedent multiplied times the built in gain plus the original cost will be the surviving tenants basis on all the shares

http://www.irs.gov/pub/irs-pdf/f706.pdf page 13 IRC 2040(b)