Thank you so much for your help I really appreciate it.
I still need help with clarification on the life estate step up
because I have also been told that there is no step up with life estate of a Non Us resident with Non Us property.
Here is what I was told:
I do not believe you will receive a stepped-up basis at death. A person receives stepped-up basis to date of death value for property acquired by “bequest, devise, or inheritance, or by the decedent's estate from the decedent” (IRC 1014(b)(1)). Here, you received the property by gift during his parents’ lifetime; it is not a bequest, devise, or inheritance.
A person can also receive a stepped-up basis to date of death value for property pursuant to IRC 1014(b)(9), which provides:
In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent's gross estate under chapter 11 of subtitle B . . . .
If his parents were US citizens or residents, or if the property were in the US, the property would have be included in his parents’ estates under IRC 2036 at death because of their retained interest in the property. However, because the property is not subject to US estate tax, it is not “required to be included in determining the value of the decedent’s gross estate under chapter 11 of subtitle B.” So IRC 1014(b)(9) does not apply.
I’ve done some initial research in the treatises to confirm my result, and I have found little on point addressing this particular fact pattern. It is possible that there are IRS decisions that construe property received through a life estate deed (the US analogy of what Benjamin received in Italy) as having been received by bequest, devise, or inheritance, but I am not optimistic.
IRC 1014 does not apply and IRC 2036 does not apply
because of IRC 2103
Here is the exact situation again.
My father a Non Us resident / Non Us citizen makes a life estate deed
to his property where I his US resident son am the remainderman
and he retains "usufruct" / life estate
The property is outside the US.
I reported the remainder interest % of FMV at time of deed on form 3520.
What happens next when my now very old father passes away and I
should decide to sell the property some time in the future?
My plan is to file another 3520 at time of death reporting full FMV
of the property at that time of death and use that FMV as basis for future
capital gains assessment.
Is there anything wrong going forward like this ?
I need to know what I should .
What would you do in my situation.