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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My father inherited property in 1975 and created life estate

Resolved Question:

My father inherited property in 1975 and created life estate deeds with his four children as remaindermen in 2/1999. He is now 84 years old and wants to sell the land. Is his basis calculated when in inherited in 1975 or when he gifted it to his children in 1999? Also, do the children have basis?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
As a general rule - the basis is the purchase price.
When the property is inherited - the basis is the fair market value of the property at the time the decedent passed away.

LEV :

When the property is gifted - the basis for the recipient of the gift is generally the lesser of the donor's basis and the fair market value (FMV) at the time of gifting. Thus - if the property increased in value - the donor's basis should be used, but if the property value decreased - the basis would be the FMV.
Because - the value of the land most likely increased between 1975 and 1999 - the basis of the gifted portion of the land is likely its fair market value in 1975.

Customer:

Thank you, XXXXX XXXXX my question.

LEV :

If the property is sold now - we need to determine two values - the value of the life estate and the value of the remainderman interest. Thus - each owner will report the sale transaction of a percentage of the land he/she owns.

Customer:

Yes, I found the tables with those figures.

LEV :

The value of the life estate is determined based on the age of your father at the time the property is sold.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22648
Experience: Taxes, Immigration, Labor Relations
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