parents house sold

[WITAXLADY]

20 years ago parents "sold" house to 7 children for $1.  Children sold house now as mom recently passed, been living there.

one sibling gathering all improvements to add to basis  - that the parents all paid for when they lived there -

Property tax is listed as ETAL

Title company said no tax consequence, lo and behold they all get a 1099...

I asked to see deed? Something needs to be filed.

Life Estate and inherited or cost basis from parents from 20 years ago?

[Possi]

Having my client sell a house to his daughter for $10, I'm waiting for this response.

I may be corrected, but their basis is the parents' cost, plus improvements. It was not inherited. It already belonged to the kids. 

[Terry D EA]

Just completed one of these where the daughter inherited the house. So, the daughter's basis is FMV at date of death. I agree the children's basis is the mother's basis plus any improvements.

[Possi]

When my daddy died 19 years ago, he left each of 5 children $2000. The first $1000 came right away, the second a year later.

I took the first $1000 and bought a printer and a laptop, and made a spirit promise to my daddy that I would one day earn enough money to support myself. 

I started with less than 50 clients. I have over 500 today. 

I don't know what I would do if I had parents who gave me a house. I'd probably be homeless by now. 

Thanks, Daddy. I know you're proud of your "Possi." (The nickname he gave me)

[RitaB]

10 hours ago, WITAXLADY said:

20 years ago parents "sold" house to 7 children for $1.  Children sold house now as mom recently passed, been living there.

If mom remained in the home, I think you have an implied life estate, but others know a lot more than I do about that.

[Gail in Virginia]

I agree with Rita.  If the mom remained in the house, continued to pay the taxes and upkeep, then she had the "incidents of ownership" and has an implied life estate.  IMO, they may be able to get the step up in basis.  But, as always, it depends on the facts and circumstances. 

[Lion EA]

If it was a completed gift, the children's basis is the parent's basis the day before the gift. If the "gift" included a life estate, written or implied, the children's basis is the DOD FMV. If a 1099 arrived, report it.

[Abby Normal]

I thought you had to do calculations for life estate based on parent's age at time the life estate is established, and you end up with part carryover basis and part stepped up basis. Each year the kids own a larger % of the home. No? Carry on.

[Lion EA]

Haven't done one of these in years. I think -- without having done any research recently on this topic --  that since mom passed with a life estate, this acts like any inheritance. If mom were still alive with a life estate and a house sale, then I think the calculations are necessary to attribute to mom and to kids. You're going to need to research, sorry!

[Sara EA]

Rita and Gail are correct.  If mom lived in the home, paid the bills, etc., there was an implied life estate.  IRC Section 2036 states that such "paper only" transfers are subject to estate taxation.  Property included in an estate is assessed at fmv on date of death, which is what the heirs inherit as their basis.

[WITAXLADY]

I like the implied life estate.. The part that concerns me is the sale for a $1

Thank you!

D

[Lion EA]

The "sale" for below FMV was a gift, but an incomplete gift IF mom still lived there, paid the bills, acted like the owner. Incomplete gift goes into her estate at death and gets step up/down in value.

[WITAXLADY]

Thank  you - then still cost basis... unless LE implied - well go with that

Thank you,

D

[Lion EA]

It sounds like in your case mom had LE implied, so step up/down DOD.

[Sara EA]

In many places the $1 is required to trigger the recording of the transfer.  Like if you give your old car to your kid, DMV puts $1 sales price in order to transfer the title ($0 would imply the car was junked).