Legal Question in Wills and Trusts in Kentucky

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.

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.