mrichman333 Posted March 18, 2016 Report Share Posted March 18, 2016 K, I have NEVER dealt with this before. Father put house in life estate, he had three children. After the father passed one sibling purchased the other two out. I'm thinking the basis is the FMV at the fathers death or the time the property came out of the life estate. I tried to ask the TP if he know what the value was. He looked at me like I had two heads. He also told me his brothers CPA and Lawyer don't seem to think it's an issue. HUH! He called the brother who bought him out and the brother just kept saying "IT"S A LIFE ESTATE", like it's tax free r something and I don't know what I'm doing. Well he's a little right on that, I'm not sure about the basis but I'm 99.99% sure it's not tax free. HELP PLEASE. I want to be confident the next time I talk to him, want to be able to say something like I need to know the FMV at ..... Quote Link to comment Share on other sites More sharing options...
FDNY Posted March 18, 2016 Report Share Posted March 18, 2016 This can be a little involved, as I did one last year with different circumstances. I used as guidance www.tax-business.com/201302.html, very helpful. There was probably an appraisal done when the home went into the life estate. If the sibling who purchased the home lived in it as a personal residence that will help matters, on your part. 1 Quote Link to comment Share on other sites More sharing options...
mrichman333 Posted March 18, 2016 Author Report Share Posted March 18, 2016 Thank you FDNY Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 19, 2016 Report Share Posted March 19, 2016 16 hours ago, mrichman333 said: K, I have NEVER dealt with this before. Father put house in life estate, he had three children. After the father passed one sibling purchased the other two out. I'm thinking the basis is the FMV at the fathers death or the time the property came out of the life estate. I tried to ask the TP if he know what the value was. He looked at me like I had two heads. He also told me his brothers CPA and Lawyer don't seem to think it's an issue. HUH! He called the brother who bought him out and the brother just kept saying "IT"S A LIFE ESTATE", like it's tax free r something and I don't know what I'm doing. Well he's a little right on that, I'm not sure about the basis but I'm 99.99% sure it's not tax free. HELP PLEASE. I want to be confident the next time I talk to him, want to be able to say something like I need to know the FMV at ..... Actually it is not that difficult. You are pretty much right. Basis is value at date of death of the father. I don't see any tax repercussions until he goes to sell the property. Then his basis will be whatever it was at DOD. I am assuming that your client is the one who bought the other two out. THEY have a tax situation at this time. The purchaser does not until he sells. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 19, 2016 Report Share Posted March 19, 2016 1 hour ago, mcb39 said: He called the brother who bought him out If your client is the one that sold, you report the sale for whatever the brother paid him and use your client's share (1/3 ?) of the DOD value. It sounds as if the brother that purchased may have used the DOD value as the amount to purchase out the other two. If that is the case and if your client didn't incur any other fix up expenses or expenses of sale, then the sales price and basis would be the same figures and there would be zero gain or loss. 3 Quote Link to comment Share on other sites More sharing options...
mrichman333 Posted March 19, 2016 Author Report Share Posted March 19, 2016 My client got bought out, and I just found out TODAY that the father died in February 2015 but he and his siblings received the property in 2013. So I told him he has determine the FMV at the time they received it in 2013 He and the brother just don't seem to understand I need a cost basis. My TP called his brother to ask for the basis and all the brother says is " It's a life estate" and my TP turns around and tells me "It's a life estate" like it's of no consequence. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 19, 2016 Report Share Posted March 19, 2016 Well, now you are getting into legal issues. IF the father transferred the property in 2013, BUT retained use of the property for his life, i.e. life estate, then it depends on state law, but it may well be that the basis is FMV at father's DOD, not the date of the transfer. Or could, depending on how done, have been a 'gift'. So here's hoping that dad did it with an attorney, as seems to be the case, since you mentioned a lawyer. Ask your client to get a letter from the attorney and you are good to go, relying on that letter. Just don't rely on only verbal, you want it in writing. 2 Quote Link to comment Share on other sites More sharing options...
mrichman333 Posted March 19, 2016 Author Report Share Posted March 19, 2016 "..... Just don't rely on only verbal, you want it in writing" Agreed. I told him HE needs to get me something that show a basis and suggested he call the lawyer. 1 Quote Link to comment Share on other sites More sharing options...
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