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  1. #1
    Join Date
    Apr 2007
    Posts
    1

    Default Life Estate Clause in Living Trust and Capital Gains Tax

    My father passed away years ago, my mother passed away recently. My father and mother each had their own revocable living trusts. Their place of residence was included under my father's trust and it had a life estate clause for my mother as follows: "To (mother's name). If included as property of this trust, (mother's name) shall be given a life estate in the poperty known as (property address)."

    The property is going to be sold. Will the basis used for capital gains be the date of death of my father or does the life estate clause allow for a new basis as of the date my mother passed away?

    I consulted an attorney for this question and was told a new basis when my mother passed away will be used. But I can't find anything on IRS code 121 indicating this.

    Thank you.

  2. #2
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: Life Estate Clause in Living Trust = CGT?

    Quote Quoting mike68
    View Post
    My father passed away years ago, my mother passed away recently. My father and mother each had their own revocable living trusts. Their place of residence was included under my father's trust and it had a life estate clause for my mother as follows: "To (mother's name). If included as property of this trust, (mother's name) shall be given a life estate in the poperty known as (property address)."

    The property is going to be sold. Will the basis used for capital gains be the date of death of my father or does the life estate clause allow for a new basis as of the date my mother passed away?

    I consulted an attorney for this question and was told a new basis when my mother passed away will be used. But I can't find anything on IRS code 121 indicating this.

    Thank you.
    The life estate for your mother is what created the new basis. Trust the attorney.

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