Capital Gains on Sale of Home Held in Life Estate
Father transferred home to three children in 1999 and held a life estate in property. No monies were exchanged, no determination was made as to the homes value, no ''gift'' forms were drawn up, etc., merely a new deed was filed with the county clerk noting the children's names on the deed and the fact that father retained a life estate. Father continued to live in the home and paid taxes, insurance, maintenance, etc. Father passed away in 2001. Father had a Will stipulating the home was to be divided between the three children, but Will not probated, due to the fact that home had already been transferred (that was father's only asset). If children sell home, is there capital gains tax involved and if so, how is it calculated? (The proceeds would be divided equally among the three children). Or, because father lived in home until he passed away, would it be an inheritence? If capital gains is involved, does it have to be declared in the year of the sale? Thanks for your reply.
1 Answer from Attorneys
Re: Capital Gains on Sale of Home Held in Life Estate
By retaining a life estate in the home your father had what is called an indicence of ownership.
Accordingly, the value of the home would be included in his estate tax return, if one is required to be filed.
As a consequence, the home, in the hands of the children, is valued at the date of death value for purposes of measuring gain or loss.
Probably, no capital gain tax.
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