The cost basis, because it was a gift (not inherited after death) is the same cost basis as it was for your mother. $30,000, plus any capital improvements after her purchase and before it was transferred to you.
Do you get a stepped up basis with a Life Estate?
With a Life Estate, if you die owning the property, then at the time of your death the property will be included in your estate and your heirs will receive a step up in basis. However, if you sell the property during your lifetime, then you will receive a portion of the proceeds based on your life interest.
Can a Life Estate deed be sold?
A person with life interest generally (as we have not perused the Will) does not have the right to sell, transfer or alienate the property to the detriment of the absolute owner, which in your case is the son, i.e., you. It is a limited right to enjoy the property up to the death of the life holder.
How is the basis of a life estate determined?
It is that fair market value that determines the basis of the property in the hands of the recipient of the property. That’s fairly simple to understand when the decedent owns the entire property interest at death. However, that’s not the case with property that is held under a life estate/remainder arrangement.
How does selling a property with a life estate work?
The remainderman receives an adjustment (step-up) in basis to the amount the property is worth on the date of the life tenant’s death. This is usually quite beneficial to the remainderman who is selling the property.
When to use cost basis for estate tax?
In that situation, the remainder holder does not benefit from the property until the life tenant dies. That complicates the income tax basis computation. Uniform basis. The general idea of uniform basis is that the cost basis of inherited property should equal the value used for estate tax purposes.
How does a deed for a life estate work?
A life estate deed typically works like this: parents sign a deed transferring their home to their children for nominal consideration (i.e. $1.00). The deed includes a provision stating that the parents “retain the right to use and occupy the property during their lifetimes,” a so-called “life estate” in the property.
