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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 110420
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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We own several properties in North Carolina that are in a life

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We own several properties in North Carolina that are in a life estate. When the original owner dies and the life estate ceases to exist, do we have to pay state or federal capital gains taxes if we sell any of the properties in the life estate? What is the basis for these properties that will be used to determine the gain? Is the basis the original price paid for the property paid by the original owner who established the life estate or the current market value of the property at the time of death of the original owner
Thank you for your response. I look forward to working with you to provide you the information you are seeking.

What does the life estate say regarding the death of the grantor? Most life estates become a irrevocable trust upon death of the grantor and the heirs are beneficiaries of that trust.
Customer: replied 3 years ago.

Currently the properties are already in our name but use of the property is reserved for the life of the original owner. Upon the death of the original owner full ownership passes directly to us.

Okay, thank you for your response.

The tax basis on the properties you received would be the value as of the date they were transferred into your names, regardless of the life estate that was reserved.

The tax basis is the value of the property at the time it was transferred into your name plus the amount of any major repairs/improvements. This is the amount used to determine if any capital gains tax must be paid on the sale of the property when it is sold and any amount over that tax basis amount is the amount of money on which capital gains tax must be paid. Unlike an inherited property, your tax basis is based on the date of the naked ownership of the property being placed in your name, not the date of death of the life estate holder.

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