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  1. #1
    Join Date
    Sep 2006

    Default Life Estate Capital Gains on Sale

    The Deed on my mother's home which my parents bought 16 years ago, includes my name, it is a Life Estate, she is a widow and I am the only son. In order to avoid paying capital gains when I sell the house (in the distante future after inheriting it), is the Capital Gains on this sale figured on the purchase price my mother paid for the house OR the fair market value of the house at the time she passes away? Is it better if we put the house under her name alone via a quit claim deed to benefit from the 250,000 maximun capital gains exclusion, or can we leave it as a Life Estate and acomplish the same thing? Are there any tax consequences of removing my name ? When my father died a lawyer suggested a Life Estate 9 years ago, but after doning some reading I believe it would be better removing my name from the deed. Miami, Florida

  2. #2
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: Life Estate Capital Gains on Sale

    You own the house, with your mother having only a life estate? Then your basis for capital gains is going to be the value you paid for the house when it was titled to you, which you probably recited on the deed as something like "$1 plus valuable consideration" - with such language the tax authorities may well find that your basis is $1.

    If that's the case and you give the house to your mother to try to inherit it back, an audit may hold you responsible for gift taxes in relation to the value of the house at the time you conveyed it back to her.

    I suggest that you consult an estate planning lawyer.

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