I sounds like you mother had what's called a "life estate" in the property
You really need to check the actual deed that conveyed this "interest"
BUt if that is in deed (no pun intended) what this was ... a Life estate, then the capital gains calculationg can be very complicated ... and has to do with her life expectancy (both when granted) And her gae a t death
A life estate divides ownership inproperty in an unusual way. One person, the life tenant, has the right to live in the home for life. The other person, the "remainderman," receives full ownership after the tenant dies.
As I mentioned, when you sell property with a life estate, the IRS divides up the capital gains based on a formula involving the age of the tenant -- based on his life expectancy, in other words. If the gain on the house is $120,000 and the formula shows the remainderman and the life tenant currently have a 50-50 interest in the home, you each have $60,000 in capital gains to report. But that happens very rarely
Further, this MAY NOT be a life estate ... it may be simply a "right to occupy"
How does a “right to occupy” property differ from a “life estate” interest?The person who has only the right to occupy property only has the right to live in the home.Such person doesn’t have the right to rent the home out and receive the rent money, or to take anycrops or timber from the land. However, the person who has the right to occupy the propertydoesn’t have a duty to maintain the property.9. What terms might create a “right to occupy” rather than a life estate?(a) the right to occupy the premises (1971 NY case: Bartholomew v. Horan)(b) the right to “make their home” on the premises (1953 NY case: Rizzo v. Mataranglo)(c) the right to “live in” premises (1959 NY case: In re O’Neil’s Will)
If it is a right to occupy then the basis,will be completely stepped up to the fair market valus as of the date of death
HOWEVER, if it was a true life estate, as mentioned above, the basis will be split between you, the children, the remaindermen and his wife
You'r first step is to sit down with a property law attorney and make that determinaton
26 usc sec. 2036 requires that the full fair market value of the home be included in the gross estate of the life tenant because the life estate is considered a retained interest. Because the full fair market value is included, the remaindermen get a step-up basis for the full value of the home. There is considerable debate on the basis issue, but that is the consensus with estate planning attorneys. I usually don't file federal estate tax returns for my clients, but I do know GA's tax commission has never challenged a claim of step up basis where a life estate was involved,
Again, your first determination is as regards XXXXX XXXXX is a life estate or a right to occupy ... If you'd like to make that determination (again based on conveyance used, typically a deed or possibly our father's will, I'd be glad to drill down further.
Let me know,
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Again, I ting your first step is to determine whether this is a life estate or a right to occupy.
Let me know ...
Lane,, it is a life estate not a right to occupy she controlled the property, received all the income from it, in the will of the father when she died the acres are passed on to her 11 children. the remaindermen, thus we qualify for the step up basis?