@toyaa0 wrote:
Thank you @Anonymous_ and @TomD8 ! This is very useful information.
So if I understand this correctly: What my mother is planning to do is a "transfer with retained life estate": She will have the right to live in the apartment for the rest of her life or even rent it out to her benefit alone. There will be also certain conditions where she could claim the gift back.
However, I do not see how this apartment would still be part of her estate when she dies, as it will already be in my name at the moment of her death.
So how can the two concepts be reconciled in one contract? A retained life estate that would still be part of a "death" estate. At least by German law, I don't see how this could be done legally.
We can't comment on German law. There are times when US and foreign laws contradict each other, and in that case you pay tax in each country according to that country's tax laws. (For example, India allows an inflation adjustment to cost basis for capital gains. The US does not.)
What you describe sounds like it would be viewed as a life estate under US tax law, and you would receive a stepped-up basis on your US tax return if and when you sell the property after your mother's death. But you may wish to have the transaction reviewed by an expert.
Remember that if you are a US person (citizen, green card holder, or resident alien) you owe a US tax return that reports and pays income tax on all your world-wide income. This is filed according to US tax law and would include capital gains on the eventual sale of the apartment. You might or might not owe tax in Germany, and it might be calculated according to different rules. The US will give you a credit for foreign taxes you pay on the same income, up to (but not more than) the amount of US tax on the same income.
