Drew Edmundson <drewsbeagles[at]hotmail.com> wrote:
- quote -

The values reported on a 706 are only presumptively correct
for basis purposes. You can still claim the benefit of the
new basis (and the "benefit" of section 2036) regardless of
whether or not a return is filed.

When no death tax return is filed, I have advised people
simply to use the new basis on Schedule D, and be prepared
to document the basis if questioned by the IRS.

*Dan Evans
*Author of the Tax Protester FAQ
*http://evans-legal.com/dan/tpfaq.html

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Jon Gallo" <jonjgallo[at]adelphia.net> wrote:

snip
- quote -

What if the estate refuses to file a form 706? I am
advising an heir not the estate.

TIA

Drew Edmundson, CPA (NC)

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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

Medicaid planning that with 20/20 hindsight was not
necessary.

Drew Edmundson, CPA (NC)

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MTW wrote:
- quote -

That would be my analysis as well. It sure looks like a
retained life estate, so I'd act as if 2036 applies and let
them contest it if they wish.

Stu

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"Drew Edmundson" <drewsbeagles[at]hotmail.com> wrote:

- quote -

I have handled no-tax estates in which 2036(a)(1) inclusion
would provide a step up in basis. In those cases, I've filed
a no-tax 706 and included the property on the return with an
explanation that it is included due to a retained life estate.
I am not aware of any income tax audits that have challenged
the step up in these situations.

Jon Gallo:
Greenberg Glusker Fields Claman Machtinger & Kinsella LLP,
Los Angeles

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Drew Edmundson wrote:

- quote -

I've never had to deal with an actual case in this area, but
I think you are on the right track. As I understand it, it
is NOT necessary for a "life estate" to be mentioned in the
deed or otherwise qualify under LOCAL law. Rather, if the
"facts and circumstances" meet the FEDERAL statute, you
should be in good shape for a basis step-up.

It sounds to me like the transfer of the property was simply
an (ill advised???) attempt to avoid probate, etc., but that
the BENEFITS of ownership were nevertheless retained.

MTW

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Just an FYI before I begin, I learned about the transfers
*after* the parent's death. Parent was not my client.

Parent transferred land to children prior to death. The
transfer occurred in 2 parts - first deed was for 1/100th
undivided interest to children. Within a month the
remaining 99/100 interest was transferred to children. Two
years later parent dies.

An estate tax return wasn't required but a gift tax return
should have been filed. No federal gift tax would be due.

After transfer parent collected rents, paid real estate
taxes, etc. just like they did prior to transfer. Parent
did not live on land before or after transfer. It sure
looks like an implied life estate even though there wasn't
one included in the deed.

Now that sales are occurring it would be to children's
benefit for 2036(a)(1) to apply and it sure looks like IRS
would win if they asserted 2036(a)(1). Since no estate
return was due IRS won't be making such an assertion.

Finally my question, what has your experience been in making
the argument that 2036(a)(1) applies in such a case?

Just to be complete I have quoted 2036(a)(1), please snip if
you reply, thanks:

(a) General Rule

The value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time made a transfer (except in case of
a bona fide sale for an adequate and full consideration in
money or money's worth), by trust or otherwise, under which
he has retained for his life or for any period not
ascertainable without reference to his death or for any
period which does not in fact end before his death--

(1) the possession or enjoyment of, or the right to the
income from, the property,

--- end quoted text

TIA

Drew Edmundson, CPA (NC)

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