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Determining cost-basis for house sold after death of parent who had life-use

My mother passed away in 2018, and she was predeceased by my father 14 years earlier. After my father's death, for estate planning purposes, our attorney used a quit-claim deed to transfer their house to my name, but with my mother retaining life-use. They purchased the house back in the 1950s, and it was never used for any commercial purposes, rental, etc. I sold the house late last year after my mother's passing.

Researching how to correctly determine the house's cost basis has been rather frustrating as I have found a variety of answers ranging from the cost basis is the original 1950s purchase price + capital improvements up to complicated formulas proportioning the capital gains on a % basis split between the purchase date vs. the date of death of each parent, etc. However, the simplest answer I have found was that because my mother retained life-use, I did not have full ownership to be able to sell the property until after her death, so the date of her passing is the date for the cost basis ... this was an online attorney site, and seemed to make the most sense, but I don't want to assume that is 100% correct.

Can somebody please offer guidance on this question / direct me to resources or publications that can speak authoritatively on the subject? I live in NY State if that would have an impact on how this would apply to life-estate situations. Thanks!

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3 Replies

Determining cost-basis for house sold after death of parent who had life-use

This was a transfer via a quit-claim deed with the mother retaining life-use, so it is a life estate. The quit-claim deed was the instrument used to transfer ownership and life-state was the resulting type.
KrisD
Intuit Alumni

Determining cost-basis for house sold after death of parent who had life-use

I understand you want a clear-cut answer, but the truth is that the states control real estate law. How the title was transferred matters. 

A "Life-Estate" deed is different than a "Quit-Claim" deed. 

You really should speak with a local real estate attorney. 

Determining cost-basis for house sold after death of parent who had life-use

This is a life-estate situation, if not sold prior to death, the cost basis for the property would be the date-of-death of the decedent.

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