In 1998 my mother signed ownership of her home to my brother and I while retaining a life estate. She now wants to move into a planned senior community and wants to sell the home to pay the fees to enter. My brother and I, of course, want to help her with this as much as possible. We only took ownership to protect the asset for her use.
A lawyer has told us that the sale will be subject to capital gains taxes. The "Life Estate and Remainder Interest Table" says our share of the home is 58% because our mother is 81. The basis value would be one half of the original purchase price (my mom and dad bought the house together in 1992), plus one half of the value of the home when my dad died in 1996 as my mother's inheritance from him, plus any improvement costs. My brother and I would then be liable for capital gains on 58% of the difference between the sale price less expenses of sale and the basis value. We all live in New York State.
Is this correct? Is there any way to reduce this liability? Apparantly if we gave the house back to my mother we would then be hit with gift taxes. Is that correct? All advice and suggestions are greatly appreciated.