- quote -

You could not sell the whole place--where did the life
estate go?

Your proceeds are capital gains in 2003

- quote -

If Mother sold her life estate then the proceeds she got is
income to her. In some states the fact that one is in a home
does not mean that one's primary residence has changed out
of ones home--and it may be that her home qualifies for
exempt treatment under the 2/5 year ownership/residency
rules and NO Federal report is even required.

A mere surrender or gift of a life estate could trigger a
form 709 requirement?

You may wish to consider with counsel how not to kick a
sleeping dog!

Think! If you fail to address this in some creative
fashion within the law, Mom is of course required to report
her income from the transaction and the disposition of her
funds even if NO taxes are due. Income and assets may well
disqualify her from Medicaid.

If you merely sold the remaindermen's interests and the
buyer took the risk that the life estate holder would never
return or seek to make use of the life estate there may not
be any issues to Mom.

You should have sorted this all out before you sold---at
least sort it out now as best you can without waving any
extra red flags!!

Note there is a difference between creative approachs to
income and assets and merely hiding them--do not have Mom
hide things--its like big time illegal and a serious problem
under Medicaid!

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Parents had their house in a trust with three children as
trustees for Medicaid purposes. Mother has been in a
nursing home for 5 years and father passed away in 2002.
Mother retained life estate. We (the children) have sold
the house and wondering how the proceeds are taxed. Is it
considered income for 2003? Does Medicaid get a portion
since mother is still alive?

TIA,
Terry

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->