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Originally Posted by wonderinginnc What is the name of your state? North Carolina
My sister and I own a house and some land as tenants in common. We have held title this way since '96. My father deeded the property this way and kept a life estate. He has since passed away. My sister is now buying out my half. Do any special tax rules apply in this type of exchange? Do I have to pay capital gains tax? This is our childhood/family home. Thanks! |
Whether or not you have any capital gain (and therefore capital gains tax) depends on your basis in the property. There are two schools of thought on a lifetime estate....whether its a gift or an inheritance.
Normally when you receive a gift during a person's lifetime, your basis is their basis. Their basis would be the price they paid for the home plus the cost of any improvements.
With an inheritance your basis is the fair market value of the property on the date of death.
The consensus in my office is that with a life estate, the remainderman has no right to the property or income from the property until the person with the life estate passes, therefore it should be treated like an inheritance.
Others here may have a differing opinion.
03-31-2006, 08:27 AM
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