Sale of life estate before death of life tenant

[fredr]

What is remaindermans basis in a personal home life estate sale before life tenants death.

[TaxGuyBill]

It is a "gift", so the Basis at the time of the gift was the same Basis as the giver, then multiplied by the percentage in the Actuarial Tables.
https://www.irs.gov/retirement-plans/actuarial-tables

[fredr]

Is the percentage in actuarial tables established  on date of life estate setup or the date of the sale.

[TaxGuyBill]

I think it is the date of the setup.

[fredr]

Thanks Tax Guy Bill

[Den1962]

I am the remainderman selling mom's home before death in 2019.  Is my basis using mom's basis (sale price plus improvements)  multiplied by the percentage in IRS tables from 1999 at setup of life estate , but my Gain is calculated  using current IRS tables, which give me a much higher percentage and higher Capital Gains.
 

[TaxMonkey · Accepted solution]

I just want to be clear - only the life estate is being sold NOT the entire property?

Or has the entire property sold and you want to divide up the basis?

[fredr]

Entire property was sold and i want to divide up basis

[TaxMonkey]

OK so Tax Guy Bill sent you on the right path.  First determine basis as if there was no life estate.  Often this is the basis when the interest was inherited. Then determine basis of the life estate based on life expectancy.  Us the age of the life tenant at the time of the sale.  Remainderman's basis is what remains.

If the life tenant actually lived there they can qualify for 121 exclusion.  Remaindermen can't.

[TaxGuyBill]

Thanks for the correction about the percentage used ... I mistakenly said the date of the creation of the Life Estate, rather than the time of the sale.

[fredr]

If life estate was set up 8 years ago this would be a long term capital gain for the remainderman correct?