Discussion:Basis in Life Estate
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Discussion Forum Index --> Advanced Tax Questions --> Basis in Life Estate
Discussion Forum Index --> Tax Questions --> Basis in Life Estate
| 8 November 2007 | |
| Husband, H, died in 1965 and left property to daughter, D, subject to a life estate to Wife, W. Upon the death of W in 2006, may the property basis be stepped up to the 2006 value for D's eventual sale? | |
| 8 November 2007 | |
| If the wife owned the property outright at the date of death and she was the life tentant, then the life estate (property) until estate tax laws must be included in her gross estate at death. Therefore, the daughter gets a step up in basis for the property. However, you must also take the estate tax return into consideration because that value must be included. If it is under the limit than you are ok.
I just went through the same situation and that is why I can answer this question. Understand that there is not much tax law on life estates. | |
| 8 November 2007 | |
| Look under Section 2036(a) I believe it talks about taxpayers retaining control over the asset. The IRS typically will include assets in an estate if the taxpayer still has some control over the asset. My opinion is that retaining a life estate qualifies as retaining control over the asset and would be includable in the estate. Thus I agree with Pascindon's advice regarding the step-up in basis. Check out the code section for further information. | |
| 8 November 2007 | |
| I would disagree. If wife had no ownership in the property when husband died the life estate is not self created. There would be no estate tax inclusion and no step up. Basis is husband's date of death. | |
| 8 November 2007 | |
| Agree w/ Dennis. Under the facts posted, wife was not the one who transferred the property to child keeping for herself the life interest. Rather the husband created the life interest in wife -- thus wife couldn't have "retained" an interest (she wasn't the original transferor). Wife's life interest expired at her death (probably including nothing in her gross estate with respect to the life interest) w/ remainder passing to child. Child's basis likely would be FMV upon husband's DOD. | |
| 8 November 2007 | |
| Agree with Dennis and Bengoshi. 2036 does not apply. Basis is FMV in 1965. | |
| 14 November 2007 | |
| I agree that 2036 does not apply. I was looking to 2044 and using regulation 20.2044-1(c) without disproving the presumption. Thoughts? | |
| 14 November 2007 | |
| No, Sec. 2044 would apply to QTIP property. I see no QTIP property here. | |
| 5 December 2007 | |
| Riley, I believe all QTIP definitions met under 2056(b)(7) except the actual election (v.) The 1965 estate was not taxable therefore no election made. So, no qualified interest? | |
| 5 December 2007 | |
| And if wife had hit the lottery you would be looking to take the opposite position?♫ You don't technically have to file to make an election, but you do have to make one. | |
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