Property tax basis question.

Forum|Forum|3 years ago
March 21, 2023
2 replies
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I have a deed (sort of a reverse mortgage) on my parent's house that says I get it once they pass. After they pass, is the tax basis based on the sale price in the deed or the current market value when I really get ownership/title?

KrisD15

I think you are referring to a "Life Estate' where you inherit the property without the property going into probate.

In that case it SHOULD be Fair Market Value on the date of death, but Real Estate is governed by State Law, so speak with the attorney that made the deed change for clarity.

LIFE ESTATE

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rjs

Employee

What do you mean by "sale price," and why do you say it's like a reverse mortgage? Did you pay your parents for the house, or are you making periodic payments to them? If you are paying anything, that's different from a life estate. You need to consult the real estate lawyer and a tax professional to clarify what you have and what the tax effects are.

johnkremerAuthor

Yes, I actually paid my parents for their house (paid off some bills & a monthly allowance for several years) - I would think like a reverse mortgage. The deed reference a Sales Contract that stated the amount & the number of payments. Payments are long past & my mother can stay in the house until she passes. After reading the difference between a Deed & Title - I was wondering about taxes/capital gain upon death. Would the tax basis be bases on what the Deed says; or, based on current market value since I don't have ownership/title yet?

rjs

Employee

You are not going to be able to get answers here. You need to consult a lawyer and a tax professional to clarify ownership and tax effects. The lawyer will want to look at the deed and any other related documents.