Discussion:Property sold at loss rec'd from estate
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Discussion Forum Index --> Tax Questions --> Property sold at loss rec'd from estate
| 27 July 2006 | |
| I have a client who received real estate from his from his father one week before the father's death. Since this property should therefore be included in the father's estate I assume there is a step-up in basis to FMV to my client. Due to bad decisions, my client was forced to sell the property at well below FMV (via a lawsuit). This real estate was income producing property. Would this sale generate a tax loss? And if so, what type of loss? | |
| 27 July 2006 | |
| Why do you feel that the property would be included in the taxable estate? Was there a 2036 life estate? | |
| 27 July 2006 | |
| If he received it before his fathr's death, was it a gift? If so, don't see how there would be step up. | |
| 27 July 2006 | |
| If gifted before father's death, the only way it could be in his estate is if the father retained certain powers such as amend, revoke, or terminate the gift. Sec. 2035.
- Corrected apparent typo - Sec. 2035 instead of 2305. - Tim Doyle, TaxAlmanac Moderator - Talk to me 06:46, 28 July 2006 (CDT) | |
| 27 July 2006 | |
| With a personal residence you get a little leeway on transfers like this. I've seen something as simple as the address listed on father's death certificate accepted as evidence of an agreed life estate retention. But with a rental? Count me in on the dubious side. ♫ | |
| 27 July 2006 | |
| If I understand the law, gifts made within a certain time period before death are included in the gross estate of the donor. If that is the case, wouldn't there be a basis step-up? Please tell me if and why I'm wrong.
Thank you. | |
| 27 July 2006 | |
| Certain gifts, not all. As Solomon almost said, Sec. 2035 covers some and as Riley noted, Sec. 2036 covers others. Nobody seems to think the requisite paperwork exists for the transfer you are decribing to fall into either category. | |
| 27 July 2006 | |
| If Dad retained the right to the rental income from the property, then I would certainly agree that the property should be included in the taxable estate and therefore be entitled to a step-up. The old "gifts within 3 years of death as gifts in contemplation of death" rules were virtually eliminated in 1976 (except for those gifts listed in Sec. 2035). | |
| 27 July 2006 | |
| If I'm not mistaken, after reading the two Sections, it appears that the gifted properties must be included in the father's gross estate. The transfer was effected approximately one week before death. | |
Chautauqua (talk|edits) said: | 28 July 2006 |
| No, it is not the properties that must be included in the gross estate. It is the VALUE of the properties. Would you also require recipients of cash gifts to return them to the estate? I think not.
Unless there is something you have not told us about, I don't see any step-up. | |
| 28 July 2006 | |
| Value would be attributed to taxable gifts, not gross estate, however little difference in consequence except for annual exclusion for current interests. | |
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