capital gains basis for remainderman on life estate set up by will?

[Michael2]

What is the name of your state (only U.S. law)? Illinois

I am aware of the 'step up' in basis for capital gains upon inheritance (for simple circumstances).
My grandmother's will bequeathed a life estate in all her real estate (owned free and clear) to my uncle for his lifetime.
I am the remainderman for the real estate.
If I eventually sell the real estate after my uncle's death, is the capital gains basis the value at the time of my grandmother's death or the value at the time of my uncle's death?
For the purposes of estate tax, is the value of the real estate included in the estate of my grandmother, my uncle, or both?
I would assume that the 'step up' in basis would occur each time the value of the real estate is included in an estate for estate tax purposes.
I would appreciate any URLs that provide relevant information about my specific circumstances.

 

[FlyingRon]

The property steps up at the time the life estate tenant passes.
The property is also part of the taxable estate for the life tenant, so yes if big enough there may be issues there.

The actual Internal Revenue Code concerning this appears to be §1014(b)(9)

 

[anteater]

Ron -- Not an area in which I have the greatest knowledge and I'm sure someone will slap me upside the head if I am wrong. But...

It was the grandmother's will that granted the life estate to the uncle and the remainder interest to the OP. It seems to me that the cost basis would have been stepped up upon the grandmother's death and there would be no further step up upon the life tenant's death.

Since uncle's life tenancy ends upon his death, there is no value to be included in uncle's estate for estate tax purposes.

 

[FlyingRon]

You might be right Antie. While what I said would have been true if the property had been transferred by the life estate tenant, in this case it was not transfered from the uncle to the remainderman. Hopefully Lidj will swing by.

 

[tranquility]

Anteater is correct. The step-up occurs when the property is first transferred by the deceased and not when the life tenant passes.

The code FlyingRon posted has more to do with a *retained* life estate and allocation issues.

There is nothing to be included in the life tenant's estate when he passes.

The topic can get into the tall weeds very quickly depending of the specific question. For example:

I would assume that the 'step up' in basis would occur each time the value of the real estate is included in an estate for estate tax purposes.

That is the rule of thumb which is problematical with the change this year.