House deeded to son

[neilbrink]

Client received a house that was deeded to him from his mother for $1.  Mother is elderly and could not afford to fix up the house (new roof, etc.). They have agreed that Mother can live in the house as long as she is able and would pay the general expenses for the house (taxes, insurance, utilities, etc.).  Client would take care of the major expenses, and wants to convert the house into a rental after mother leaves.  Is there any basis value in the house, since it was basically gifted to him, other than the capital improvements that he has made since he received it?

[Abby Normal]

Go read the thread on Life Estates that was on here recently:

[Jack from Ohio]

Client received a house that was deeded to him from his mother for $1.  Mother is elderly and could not afford to fix up the house (new roof, etc.). They have agreed that Mother can live in the house as long as she is able and would pay the general expenses for the house (taxes, insurance, utilities, etc.).  Client would take care of the major expenses, and wants to convert the house into a rental after mother leaves.  Is there any basis value in the house, since it was basically gifted to him, other than the capital improvements that he has made since he received it?

His basis is the same basis that his mother had.  The $1 "trick" causes more problems that it prevents.

Since the mother gifted the remaining value of the house, a gift tax return may be in order.