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Carol Linder · May 11, 2009, 12:03 PM

In 1998 my parents transferred their house to me but kept the right to live there in something called a Living (or Life) Estate. My Dad died in 2005 and my Mom is in an assisted living facility. The house is in the process of being sold. Will I have to pay income tax on the proceeds of the sale?

AtlantaTaxExpert · May 12, 2009, 10:15 AM

Carol:

First, you have to establish the official date of transfer of title for basis purposes.

If it is 1998, then it is likely that capital gains taxes will be owed, because the house will have appreciated considerable in the last 11 years/

If it is 2005, then perhaps not, given the general decline in housing values the past few years.

You need to take this problem to a local tax professional who can examine the documents to determine when transfer was effected.

smearcase · May 12, 2009, 12:27 PM

Is Medicaid involved in your mother's care? If yes, are you sure they don't have a lien on this property?

Carol Linder · May 12, 2009, 01:09 PM

Thank you both for your answers. Mom isn't on Medicaid. The house was transferred to me in 1998. With the decline in the housing market and the fact that the neighborhood that the house is in has gotten really bad the house is probably worth less than it was in 1998. Actually I'm selling it for $2,000 less than my parents paid for it in 1992.

Carol Linder · May 12, 2009, 01:22 PM

I just thought of another question. How do I prove what the house was worth in 1998?

AtlantaTaxExpert · May 13, 2009, 09:55 AM

That relatively easy; a comparative assessment for the house in 1998 can be done by a local real estate firm.

They will charge you a fee, but the RS accepts the results of such an assessment as true FMV.