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  1. #1
    Join Date
    Jul 2020
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    1

    Default Cost Basis for Remainderman Heir when Remainderman Passed Away Before Life Tenant

    Hello,

    I am trying to figure out how to calculate the cost basis on a property that was set up as a life estate. My mom was a remainderman in the life estate and passed away before the grantor of the life estate.

    Here is the exact scenario:

    My grandparents set up a life estate on their house with their children with the children being tenants in common and my grandparents maintaining a life interest in the property.

    My mother (one of the remainderman) above passed away before my grandmother (life interest holder) passed away. I was the sole heir to my mother's interest in the property so I became the remainder owner of her share.

    The last remaining original life interest owner(my grandmother) recently passed and we sold the property. I was wondering how my basis should be calculated for capital gains purposes since the remainderman that I inherited my share from passed away before the original grantor with life interest?

    Thank you!

  2. #2
    Join Date
    Oct 2014
    Posts
    8,026

    Default Re: Cost Basis for Remainderman Heir when Remainderman Passed Away Before Life Tenant

    Quote Quoting ptl71
    View Post
    I was wondering how my basis should be calculated for capital gains purposes since the remainderman that I inherited my share from passed away before the original grantor with life interest?
    Your initial basis would be the fair market value (FMV) of your mother's remainder interest at the time she died. This will require computing the value of life tenant's interest on that date and subtracting that from the FMV of the entire property on that date. You then split the remaining FMV equally among the owners that were left after the life tenant died (assuming, as is likely, that all remainderpersons had equal interests in the property) to determine the FMV of your share. That then is your initial basis.

    Once you determine your initial basis, you adjust that for any improvements to the property that you paid for, any depreciation you took or could have taken, etc. to reach your adjusted basis. Subtract that from your share of the net sales proceeds to determine your gain or loss.

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