I would like to focus on the the life estate issue.
If my father were a US person the life estate proprty would be pulled into his estate and get step up.
He is not a US person so it is not part of a US estate but than neither
is a property without life estate and that gets stepped up.
The reason for that is that it is inherited without life estate and
with life estate it is not deemed inherited under 1014 because of
the previous gift of remainder interest. But 2036 allows that but only for
Seeing that this is a very difficult subject what is the worst that could
happen when I just do the following :
1) Life estate deed is done I reported 3520 remainder interest of FMV at
time of the deed.
2) My father passes what do I do ?
I report full FMV at time of death as inheritence or what ?
The fact remains
once my father passes I own full rights to the property so FMV is a lot higher.
This will be a very sizeable inheritance with 4 properties out of
which 3 have life estate and I am the only one left in the family.
( Have you ever seen an information report (3520) being challenged?)
3) At some point later I sell and use FMV at my father`s death as basis
to report capital gains.
What is the worst that could happen if I just stay that course
Allthough it should not make any difference in terms of the law but because the properties being sizeable I fear attorneys having a feast over this the more I make
it an issue
What would you do in my situation ?
All this can give one thoughts of expatriating and I wonder what the basis of the property would be with my father still alive to determine exit tax .