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cost basis on inherited home with a life estate with remainder in fee simple

Forum|Forum|3 years ago
December 28, 2022
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Life Estate Question -Cost Basis

A. My grandmother died in 2001

B. Her daughter Rose was listed and granted in the deed of distribution to live in the property for her natural life or until she vacates. She never vacated, she died in 2018.

C. All of the living daughters were listed in same deed of distribution "with the remainder in fee simple, as tenants in common to the following individuals or, if deceased their descendants.

D. The daughter Rose, allowed to live in property died in 2018

E. ALL of the remainder in fee simple daughters are deceased, thus leaving property to their children, their descendants. A total of 10 with a different percent of ownership. (all grand children)

F. Grandchildren sell the house in 2022

#1 Questions on value of property/cost basis determination?

a. 2001, when grandmother dies

or

b. when each remainder daughter dies (different year for each one) ALL prior to 2018

or

c. 2018 when Rose dies (daughter granted to live for her natural life)

#2 Question: we all received a 1099S from the title company when we sold the property in 2022. We all have a different percent of ownership. Which tax form do we use to report the proceeds of sale.

How will the gain be determined?

Thanks for your help. I searched everywhere to get answers, examples. If you can provide answers and source used for answers, it will be greatly appreciated.

Best answer by Anonymous_

The basis as to the remaindermen would be the fair market value on the date of the last life tenant to die.

As to the descendants, they take their share through the those who were granted a share of the fee after the death of the last life tenant and, as a result, their bases (plural) will vary depending on the fair market values on the death of each remainderman.

This is rather complex and you should seek the guidance from a local tax professional and/or legal counsel.

See https://taxexperts.naea.org/listing/service/estates-gifts-trusts

A

Anonymous_

Employee

Read 26 CFR § 1.1014-1 et seq.

https://www.law.cornell.edu/cfr/text/26/1.1014-1

P

pattylovelifeAuthor

I read this link and it does not answer any of my questions I posted. It makes no mention of life estate or when the basis is determined.

A

Anonymous_

Employee

@pattylovelife wrote:

I read this link and it does not answer any of my questions I posted. It makes no mention of life estate or when the basis is determined.

You did not read far enough. Note that I added "et seq." at the end of the cite.

A

Anonymous_Answer

Employee

The basis as to the remaindermen would be the fair market value on the date of the last life tenant to die.

As to the descendants, they take their share through the those who were granted a share of the fee after the death of the last life tenant and, as a result, their bases (plural) will vary depending on the fair market values on the death of each remainderman.

This is rather complex and you should seek the guidance from a local tax professional and/or legal counsel.

See https://taxexperts.naea.org/listing/service/estates-gifts-trusts

A

Anonymous_

Employee

Re the basis upon the sale, each grandchild may (probably will) have a different basis depending upon who they inherited the property form, but the basis calculation is simple:

Their share of the sales price (less selling expenses) minus their adjusted basis.

Again, consult with a local tax professional and/or legal counsel who can review all of the documents, including deeds, testamentary instruments, et al.

P

pattylovelifeAuthor

Hi again. I am doing my own turbo taxes. Two simple questions.

All fee simple tenants in common are the remainders, whom all were deceased prior to 2018,

except for one. The one tenant in common had a life estate whom did not die until 2018

The basis/step up bases is determined by which?

A. when the grandmother died in 2001

OR

B. when each remainder tenant in common becomes deceased

OR

C. when the one tenant in common whom had the life estate dies in 2018 (step us basis?)

Please let me know. I am asking because I am not finding the answer in any publication.

I would assume if C is the answer, the step up basis/value would be the same for all grandchildren (not different), each grandchild would have a different adjusted basis.

Their share of the sales price (less selling expenses) minus their adjusted basis.

Question #2 what form do we use