Legal Question in Wills and Trusts in Kentucky

Life estate & capital gain

My father transferred his home and farm to me & my siblings in 1987, retaining exclusive use & control during his life, which I assume constitutes a life estate. He died in 2001 and the attorneys handling the estate told my brother, the executor, that this transfer was a gift and we have to pay capital gain tax. Is this correct and if it is how do we determine the basis?


Asked on 2/03/02, 7:55 pm

2 Answers from Attorneys

Philip Owens Philip M. Owens, Attorney at Law

Re: Life estate & capital gain

The basis of the property would be its fair market value at the time of the transfer. There are tables to compute this through the Kentucky Department of Revenue.

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Answered on 2/04/02, 7:16 am
Mary Ann Wunder Wunder & Wunder

Re: Life estate & capital gain

A remainder interest was created at the time the farm was transferred subject to the father's control. This remainder interest was the gift from the father to each child. The value of the remainder interest is determined by the tax laws in effect at the time of the transfer as to whether the basis was the then fair market value of the property or whether there was a carryover basis. The growth in value between what it was worth at the time of the transfer by father and what it was worth at his death, assuming you sell it then or later, is what is taxable as capital gains. If you are uncertain that the attorneys for the estate are correct as to the value of the property, consult your tax accountant.

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Answered on 2/04/02, 3:49 pm


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