22 years ago my father remarried with a pre-nuptial agreement which had a 2nd home condominium (which he fully owned) excluded from his wife with respect to possession, but it stated that if he died prior to her, she was allowed to live there until her death. Less than 4 years after their marriage my father passed away with a will which gave this 2nd home condo to me. The wife lived there as her primary residence while paying all expenses, and I was never able to step foot in it, so for 18 years she lived there without paying any rent to me. In early 2020 she passed away and then that condo became my 2nd house. In a rush to unload it I sold it mid-2020 at less than fair market value.
I am trying to determine my cost basis. There are so many IRS phrases which seem to apply here. IRS publications talk about date of death of ‘the decedant’ but I am not sure who should be considered the decedant in this case. I did not enjoy use of the property, and I was not compensated. What is the date of ownership/acquisition? What is the date of inheritance? Is the condo part of some kind of ‘life estate’? Is the wife considered a ‘life tenant’? Is the condo part of an implied trust? Does the date of the wife’s death constitute the termination of a continued estate or the end of a testamentary trust? Is the condo considered a ‘restricted property’? The concept of using FMV for valuation of a ‘restricted property’ is discussed in IRS p551; my situation is not one in which the property is received as a form of payment, but use of the condo was certainly restricted and does not become fully ‘vested’ until the end of the term of the life occupancy. I use TT Premier, and I have seen another post which recommends entering “inherited” in the date-acquired field – should I do that? But then I believe TT will ask who the decedant was – what is the answer to that?
I have searched Turbo Tax forums and other areas of the web for answers but I cannot find anything which pinpoints the nuances of this situation. Thank you for any help.
