topic Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed in Investors & landlords

Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

Vfdjnk — Thu, 25 Mar 2021 01:36:30 GMT

My parents bought their home in 1980. They created a deed in 2004, referred to as a "Reserved Life Estate and Future Remainderman Interest In" myself and my brother. The deed shows the Transfer of Ownership was made for the sum of $1.00. My parents passed away in 2019. We sold the home in 2020.

Are the following values (as shown in the Premier desktop version) determined at the time of the original purchase (1980), time of deed (2004), or the time of death (2019)? -

1) "Date acquired"?

2) "Cost or other basis?

In the Online Premier version, the values are labeled as shown below. Would the answer to my question above be the same?

1) "Date acquired by previous owner"

2) "Previous owner's Cost Basis"

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

M-MTax — Thu, 25 Mar 2021 01:48:31 GMT

Fair market value on the date of death.......in 2019......which is also when you acquired the remainder interest.

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

Vfdjnk — Thu, 25 Mar 2021 04:20:15 GMT

Thanks for the quick response. Using the market value on the date of death will result in short-term gains. Under what circumstance (if any) would it be appropriate to determine the cost basis starting with the purchase price paid by my parents in 1980, plus all capital improvements made since then?

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

Critter-3 — Thu, 25 Mar 2021 12:39:31 GMT

Your only option is to use the FMV as of date of death and the holding period will be long term and if there is a profit then it is taxed as long term capital gain.

Now remember that you need to add the cost of sale to the inherited cost basis so if you sold the home shortly after you inherited it then you should have a deductible loss and not a gain.

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

Vfdjnk — Fri, 26 Mar 2021 18:57:27 GMT

When I use the FMV at the time of death, I'm pretty sure I can add the cost of capital improvements made afterwards to derive the cost basis. But what about including capital improvement costs made by my parents before their death?

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

Vfdjnk — Fri, 26 Mar 2021 18:58:35 GMT

Re: Determining the cost basis of a home sale that I inherited through a Remainderman Interest deed

M-MTax — Fri, 26 Mar 2021 19:10:42 GMT

No, you can't use the cost of improvements made by your parents before their death....only the ones you made.