Basis - Purchase Price or FMV at time of death

[mitcheb]

In 1978 my wife's dad was having some demencha, so her sibling had his farm split up and given sections to each sibling.  Her dad was given the right to live on the land and collect any rents or any other income from the land.  Her dad died in 1980.  The wording on the new deeds given to each sibling says the following.  " For and in consideration of the sum of $1 and Love and Affection for the seven siblings, her dad does bargain, give, grant and convey the parcels of land to each sibling. My question is whether our Tax Basis is $1 or the fair market value of the property at her dad's death. 

[DavidD66]

It is not $1.  The sale to your wife and siblings for $1 each is effectively a gift of the property.  If your wife's father retained a life estate in the property, then you wife's basis (as well as her siblings) is the value of the property at the time of his death.   Was a life estate deed prepared and recorded?  A life estate deed needs to clearly state that the property is being conveyed "to life tenant (your wife's father, for life, then to the "remainderman" (your wife and her siblings).  If this wasn't done, then the basis in the property would be your wife's father's basis in the land as it was gifted, and not inherited.  In this case there would be no step-up on basis.  

You should probably consult with an estate planning attorney.