I have never seen one like this. Mother sold son percentage of house for consideration of $55,000K but retained life estate. This represented the amount son had paid over the years on the mortgage. Deed was actually filed documenting this transaction showing change of ownership and the amount of consideration. Mom is still alive and now moved in with son due to dementia. He wants to sell house. Looks like a capital gain to me for his percentage. I have dealt with gifting and life estates, and if the donor dies it gets stepped up basis on the entire amount since it is treated as an incomplete gift. In this case, it looks like a pretty complete sale to me. Why he did not just file a lien (mortgage) with the courthouse is beyond me. Then he would be paid off at sale, but no ownership interest. Trying to beat Medicaid, I guess.
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This and Estates in general are beyond my experience, and you very well may know this, but if there is a Life Estate, the mother still owns part of it. A Life Estate is part Gift (or Sale, depending on the details of the transaction), part continued ownership. Here is a small portion of an article that mentions that:
"The transfer/gift of the property to the persons who are deeded the property is a completed gift/transfer. Detailed regulations exist that specify the value of the asset transferred (known as the remainder interest) and the value of the retained life estate. For example, if a person that is 70 years old that deeds away his/her property that is worth $100,000.00 and retains a life estate he/she is deemed to have given away a remainder interest worth $39,478 and to have retained a life estate worth $60,522. The value of the life estate is important if there is a sale of the property prior to the death of the person holding the life estate. The value of the life estate is also important to determine the amount that can be claimed as a lien against the property if the life tenant received medical assistance."
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The son doesn't own it until the gift is complete. The son doesn't own the property until mom dies and there is no stepped up basis.Originally posted by Burke View PostComment
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Fmv
I am assuming when the transaction occurred between mother and son that the house was worth more than $55,000. If this is accurate, then to me you have two sales. The son has the sale of the percent applicable to his $55,000 in basis and then there is the sale of the remaining (life estate portion) that you have to use some tables to compute the gain. As I have never used these tables I can offer no additional help.Comment
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