- quote -

Life estate property gets stepped up to full FMV at date of
death of the last person to hold the retained life estate.

Gene E. Utterback, EA

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Rich Carreiro wrote:
- quote -

Whoops! You're right. Section 2036 includes the value of
"all property" transferred by a decident "under which he has
retained for his life or any period not ascertainable
without reference to his death" the possession of property
or the right to decide who is entitled to possession.

Stu

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Stuart Bronstein <spamtrap[at]lexregia.com> writes:

- quote -

But doesn't the Code or Regs say that a life estate
is completely pulled back into the decedent's estate
for estate tax purposes, and therefore a normal, full
basis step-up is obtained?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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DaveCPA wrote:

- quote -

Here's my guess of how it should go:

When the life estate is created, Wife transfers only a
partial interest in the property to the kids. If the
actuarial value of what is transferred is 60%, then that
portion retains Wife's basis. The balance, the part
transferred upon death, would get stepped up basis.

Stu

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- quote -

***The only thing wrong, with this part of your inquiry, is
that 1/2 the original cost + 1/2 value at time of death +
various improvements is not valid when calculating the step
up in basis.

The step up at the time of the husband's passing would be
1/2 the value of the property on the date of his death.

- quote -

****The value, on the date of death (likely) is the stepped
up basis used in determining the children's basis. Subtract
it + the costs of selling (and any improvements made prior
to sale) from the selling price to determine gain/loss.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Husband and Wife own a house as tenancy by entirety
purchased in 1952 in Massachusetts. Husband dies in 1980.
Wife inherits at that time. Wife deeds property to her 4
children in 1992, retains a life estate, and subsequently
dies in 2003.

The home will be sold next week.

For tax purposes, I believe that the basis is as described
in a previous post - ie, 1/2 original cost + 1/2 value at
time of husband's death + various improvements.

Question is: I was told that the life estate keeps the
property in her estate and that the property stepped up in
2003 when she died. Thus, next week when the property is
sold, the taxable gain to the 4 children is minimal (value
at sale minus value in 2003 at her death). True?

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