Can I get a stepped up basis if my mother gifted her house to me and remained in her house by agreement until she died?

[Anonymous_]

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@fct Jenn wrote:

Mom actually quit claimed the deed over to her two kids. She recently passed and we are hoping there is an implied life estate even though the kids have been on the deed for over ten years.

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An interest or right is treated as having been retained or reserved if at the time of the transfer there was an understanding, express, or implied, that the interest or right would later be conferred.

See Treas. Reg. §20.2036-1

[Opus 17]

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@fct Jenn wrote:

Sorry, a bit more info on that house. Mom lived in the house until she passed and paid the mortgage which was in her name and the tax bill which was also in her name. The kids lived in two different states.

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The life estate would be implied by the circumstances.  For example, if your mother gave you the property with the intention of living in the house until she died, so it didn't have to go through probate, and with the understanding that the two new owners (you and your sibling) wouldn't sell out from under her.  That's a life estate, even if it wasn't written down exactly correctly in the deed.  

The problem comes if you are audited--can you prove the circumstances of the life estate to the satisfaction of the auditor?  You may want to consult with a tax professional as to what proof you should gather now and save with your other tax papers in case of audit later.  Certainly, the fact that she paid the mortgage and taxes and you lived elsewhere, will help prove your argument.