Scenario:
My wife passed away in 2008
I have I a life estate on 100 acres
Value per acre in 2008 was $500
Total land value in 2008 was $50,000.00
One remainderman on life estate
2024 Oil Pipeline "easement" (surface purchase)
Value per acre in 2024 is $2000
Step up of $1500 per acre
Total surface area of two acres
Total received $20,000 ($10,000 per acre)
The $20,000 is split, per IRS tables. 80% goes to life estate holder and 20% goes to remainderman.
1. How do I adjust the land basis value?
a) Adjust the basis of the life estate down by $17,000 ($20k - step up of $3k) making the adjusted basis $33,000 or
b) Adjust the basis of the two acres down by $17,000 ($20k - step up of $3k), making the adjusted basis of the two acres $0 and claiming $17,000 in current capital gains and paying taxes on those capital gains?
c) Something totally different?
2. Are capital gains currently taxable?
a) If so, how do I report the receipt of my 80% portion of $17k (($13,600) on my income tax form and report the other $3,400 as going to the remainderman?
b) If not, how do I report the sale, receipt of monies, and division of monies on my income tax form?
