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Capital Gains - Tax On Mother''s Property

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    Capital Gains - Tax On Mother''s Property

    Taxpayer's name was added by vitue of a deed addition in July 1985. At this point, just his Mother's name and his name appeared on the deed. In June 2010, she passed away. Their was no "will."
    He sold the property in Feb. 2014.
    Question What is his basis?

    1) Since it was a deed addition, does he take on 50 percent of her basis in 1985? Would this change be considered a gift? I know with a gift you take on the donor's basis.
    2) Now, she passes away in 2010 as I mentioned earlier. Without a will, does the son take his mother's basis rather than the FMV at time of death?

    Thanks for your help,
    Taxadvisor VA

    #2
    mothers property

    Half the property he uses his mothers basis.The other half he uses FMV at time of death.Was there a gift tax return filed at time of his name going on title?

    Comment


      #3
      Reply to Tax On Mother's Property

      Originally posted by MDEA View Post
      Half the property he uses his mothers basis.The other half he uses FMV at time of death.Was there a gift tax return filed at time of his name going on title?
      I agree with using his Mother's basis. I don't know if a gift tax return was filed or not but I will find out. However, even w/out a will you are saying to use FMV at time of death. Is this automatic? Will doesn't play into it at all?

      Thanks for responding,

      Taxadvisor VA

      Comment


        #4
        I think it depends.


        If there was a specific "life estate" recorded, then the son gets the full 'step up' basis on date of death.

        If there was not a specific "life estate" recorded and the son USED the property after he was added to the title, then he received 50% of mother's basis, and the other 50% is 'stepped up' basis on date of death.

        If there was not a specific "life estate" recorded and the son did NOT use the property after he was added to the title, there MIGHT be an 'IMPLIED' "life estate" involved. That would allow the full 'step up' basis on date of death. Although it may be difficult to prove in an audit, I think that is often a legitimate option.


        If I remember correctly, 2010 gets the 'step up' in basis on date of death UNLESS the estate return made an election to use the mother's basis (to avoid Estate taxes).

        Comment


          #5
          Tax Guy Bill Reply

          Originally posted by TaxGuyBill View Post
          I think it depends.


          If there was a specific "life estate" recorded, then the son gets the full 'step up' basis on date of death.

          If there was not a specific "life estate" recorded and the son USED the property after he was added to the title, then he received 50% of mother's basis, and the other 50% is 'stepped up' basis on date of death.

          If there was not a specific "life estate" recorded and the son did NOT use the property after he was added to the title, there MIGHT be an 'IMPLIED' "life estate" involved. That would allow the full 'step up' basis on date of death. Although it may be difficult to prove in an audit, I think that is often a legitimate option.


          If I remember correctly, 2010 gets the 'step up' in basis on date of death UNLESS the estate return made an election to use the mother's basis (to avoid Estate taxes).

          Thank you very much for taking the time to respond. I am leaning toward the Son's basis being 50 percent of his mother's basis when he was added to the deed. The remaining 50 percent being the FMV at date of death.

          Taxadvisor VA

          Comment


            #6
            Was 2010 the year when there was NO step-up in basis unless an election was made? (The George Steinbrenner issue.)

            Comment


              #7
              Originally posted by Lion View Post
              Was 2010 the year when there was NO step-up in basis unless an election was made? (The George Steinbrenner issue.)
              I think it's the other way around. There is a step-up unless the election was made to opt-out of the Estate Tax.

              Comment


                #8
                Not so fast. It is fairly common for a person to add someone else's name to the title of his/her home. The added person is usually a son or daughter, but an elderly person with no children may choose to add a niece, nephew or other relative, or even just a good friend. People who do this are usually looking for a simple and inexpensive way to assure that their home's ownership will pass on to the desired person. This may not be an advisable practice, but it is a relatively common one. Most of the time these "name additions" do not constitute "gifts."

                In order for there to be a completed gift, in law, three factors must be present: (1) The donor must have the intention to make a gift without consideration or expectation of remuneration; (2) the gift must be accepted by the donee; and (3) there must be an act of delivery or transfer of the property to complete the transaction.

                In the OP above it isn't completely clear which of these steps took place, but I would speculate that none of them did. In fact I wouldn't be surprised to learn that the son didn't even know his name had been added to the title of his mother's house, way back in 1985, until she died 25 years later. In any case, a good tax adviser should get more facts and not simply "assume" there is a 50% basis carryover just because a handful of people on a forum such as this offer that opinion.
                Roland Slugg
                "I do what I can."

                Comment


                  #9
                  TaxGuyBill has a valid point. You just said "Mother's property." You didn't say what type of property it was. Was it her personal residence? Did she continue to live there after putting her son's name on the deed? Was the deed recorded as joint tenants or tenants in common? Did he live there? This could be an implied life estate situation. You say there was no will, but were there other heirs? If there is no will, then property passes based on operation of law in the state in which she resided. From the limited information, it appears it was a gift (1/2 of donor's basis) + 1/2 of FMV at her date of death. However, if there was an implied life estate, and he did not live there, it could get a full stepped-up basis. If it was his personal residence too, then you are looking at a possible 121 exclusion.
                  Last edited by Burke; 12-23-2014, 09:20 PM.

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