Selling an Life Estate House

[HardlyOld]

What is the name of your state? New York.

I was told to post this here.

My parents bought their home in 1965 for $25,000. They transfered their deed subject through a Life Estate to my sister and myself in 1999 to avoid long term health care costs. The fair market value at that time was approximately $300,000. Both my sister and myself are on the deed. My parents are the sole occupants of the house from the beginning and we now wish to sell it and buy a condo for them to live in. We are selling the house for $480,000. My parents are both 76 years old and we are buying a condo for $350,000. I guess this is a two part question. What will our cost basis be for the capital gains claimed or could we do a like kind exchange (1031)? Any other options? I was told my parents still have some sort of age limited claim to the house?

 

[FlyingRon]

Don't multiple post these things. These were all answered in your other post.
I don't see how giving a house away subject to life estate does anything to help with medical costs other than to induce intentional fraud.

Anyhow, as you were told by several of us, the value at the time of the gift is IMMATERIAL.
Your basis is the same as your parents. $25,000 (plus whatever capital improvements were made over the years).

If you hadn't tried to get dodgy with the transfer, your parents could have qualified for exclusion of $500,000 of the capital gain which would have more than covered them. Screwed now, neither of you qualifies for that.

You can't do a 1031 exchange either. That is for legitimate investments.

Unless you want to gift it back and then they wait 2 years, the only answer is to take the capital gains hit on the sale.

 

[anteater]

Don't multiple post these things. These were all answered in your other post.

That's my fault. I suggested that the OP post it here since the "tax folks" generally don't post on the Wills & Estates forums. But, then the replies started flowing in over there.