Life Estate - Second Home Sale

[pickb111]

Parents purchased home in 1962 and transferred ownership to adult children in 2003, retaining life use.  Gift tax form was filed, but no gift tax was required due to property value.  Dad passed away in 2009 and we have Fair Market Value (FMV) as stepped up basis for 50% portion of donor basis.  In 2019 Mom moved into apartment and home was sold. For calculating my capital gains, basis for my Mom's life use is at 50% of original purchase price plus property improvements over the years.

My question relates to my return in TurboTax Premier when entering Second Home Information and specifically, Gift Information input fields.

How do I record Donor's Cost Basis when 50% is stepped up FMV as of the 2009 date of my Dad's death, and 50% is based on my Mom's basis resulting from original purchase price and property improvements?  I want to make certain adjusted basis details are accurately recorded on Schedule D and Form 8949. 

Thanks!

[KrisD15]

I think you need to speak with a real estate attorney of the state in which the property was located. 

You may know what you're doing, but each state has their own laws when it comes to real estate and land title. 

It is my understanding that a "Life Estate Deed" is not treated as a gift, it is reported on the estate tax return. Also, I don't think you have such a complicated basis, I believe it is handled the same as an inheritance, it just skips probate. 

BUT this is beyond the scope of our expertise, again, speak with an attorney. 

Life Estate Deeds

[smarttees]

tax lawyers or tax pros who know this stuff is what you need....here's why:

Life Estate and Remainder Interest Tables  

Prior to death sale 

doesn't get more complicated than when a retained life estate is sold with the remainder interest to a third party while the life tenant is still alive.....after death it's easy but before it's not and the way you are thinking the basis is figured is nowhere near close....you need a pro for this.