Re: Cost basis of an Inherited land in life estate when parents die 20 years apart

Forum|Forum|3 years ago
February 9, 2023
4 replies
55 views

Father dies and left his half of farm to 5 children but mother has use til death. She dies 22 years later and leaves her 1/2 of farm to same 5 children. What is the step up cost basis on all the farm land? Thanks

Best answer by Anonymous_

The basis is stepped up to the fair market value on the date of the last life tenant to die.

Anonymous_Answer

Level 15

The basis is stepped up to the fair market value on the date of the last life tenant to die.

JosephS1

Level 8

I would refer you to the reply that HACKITOFF made in March, 2020 to a similar question:

to be hired

As your situation appears similar, I would suggest the basis of the farmland is that for the initial half that was signed over to the 5 is the fair market value at the date of death of the father and then the second half the fair market value of the farmland at the date of the mother 22 years later.

@Ofpa

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Anonymous_

Level 15

I get this, but here is why the reasoning above is likely wrong and it is contained in the very first sentence that was taken from HACKITOFF's reply ("valued in a decedent's gross estate"):

Under typical circumstances, the father and mother would have named their children as remaindermen reserving a life estate for themselves. In that scenario, the father's interest would not have been included in his gross estate. If the father's interest was not included in his gross estate, then there would be no step up in value at the time of his death.

Frankly, more facts would be needed here to make an absolute determination in this instance.

Note life tenant's interest passes by operation of law; it is not inherited and the result you want is as described in this post, regardless. Also note that the passage quoted in the above post was copied and pasted from https://lawprofessors.typepad.com/agriculturallaw/2018/08/life-estateremainder-arrangements-and-income-tax-basis-.html.

@Ofpa

GeorgeM777

Level 11

We need some additional information before addressing your tax issue. In what State were the husband and wife living at the time of the respective deaths? What do the property records reflect with regard to the wife after the husband passed away? It would be helpful to know if those records reflect that the wife had a life estate in the property following the husband's passing.

@Ofpa

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