Questions about gift tax and capital gains

[mspiege23]

My sister did a quitclaim deed to transfer her house to our three children, with a life estate option. Are there gift tax implications? She subsequently passed away while living in the house, and the house was sold. What kind of capital gains from the sale of the house are my kids stuck with?  The house originally cost about $183,000 and sold 25 years later for $600,000, with each of our kids netting $185,000.

[pk]

@mspiege23 , probate  is usually under  the State rules.  

If your "Life Estate" option stands the scrutiny, then there should be NO   federal tax implications ( Gift / Capital Gains /GST /  Estate Tax )  for the inheritors -- the basis  of the  property  would have had a step up to Fair Market Value at the time of passing of the decedent.

Please accept my condolences for your loss.

Is there more I can do for you ?

[mspiege23]

Ownership of the house was transferred to my kids before my sister passed, so it was not part of the estate when she did pass.  The kids did not inherit the house.  In fact, my sister left her estate to our grandkids.  Is the basis of the house determined at the time she bought the house in 1999 or when she transferred the house this year in a quitclaim deed?

[mspiege23]

The quitclaim deed was executed on July 2024 and my sister passed in September 2024.