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lwpat
lwpat, Tax Attorney
Category: Tax
Satisfied Customers: 25387
Experience:  Experenced in estate tax and business matters
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Is the Price I paid for my mothers life estate in the family

Resolved Question:

Is the Price I paid for my mother's life estate in the family farm deductable from the income the farm generates?
Submitted: 5 years ago.
Category: Tax
Expert:  lwpat replied 5 years ago.
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No it is not. It is simply added to the cost basis for the property.
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Customer: replied 5 years ago.

Does this really make sense (not a prerequisite for tax law) since I did not purchase the property - only the use/income for the property until the death of my mother which could be tomorrow. The purchase was necessary for her qualify for Medicaid help and to pay down the debt she has accumulated over her years in a nursing home.

Expert:  lwpat replied 5 years ago.
I understand but a life estate is a property right. Once she passes you could deduct the cost as a loss since you would lose that right.

The purchase was necessary for her qualify for Medicaid help and to pay down the debt she has accumulated over her years in a nursing home.

I am not sure who told you that but that is not true. You could have simply rented the property from her. Then it would have been deductible.
Customer: replied 5 years ago.
Rented ? Not according to the DHS: she had to spend all her assets above $2000 in order to qualify and they valued the "life estate" at $22,+++. Dealing with the DHS make the IRS look like a walk in the park.
Expert:  lwpat replied 5 years ago.
Let me clarify something that I assumed that might not be true, was the family farm also her residence?