I looked at all the discussions about this I could find. I’ve never seen this before. Can someone please tell me if I’m understanding this correctly?
My clients grandparents owned their home located in CT? Upon their death, their house was given to my client’s mother and her sister as remaindermen and his uncle was given a life estate to remain in the home until his death. The grandparents died 20 years ago. The uncle died in 2019. My client’s mother died in 2012. My client inherited a piece of the mother’s piece. Uncle lived in but did not own the grandparents’ house prior to the grandparents’ death. So......based on my research and these facts alone, cost basis of the house would be the FMV at the grandparents’ death. Am I right? Not the uncle’s death because was not an owner of the house prior to the creation of the life estate.
Now, a little more information. The uncle moved out of the house shortly after the grandparents died and began renting the property. Oh and it’s a two family house. So....on the side of the house that was always rented, how would (or should) the depreciation have worked? Would the depreciable basis have been one half of the full FMV at grandparents’ DOD? For the portion the uncle lived in, would that not have been depreciable because the life tenant and remaindermen are related! Thought I saw that somewhere.
What if we can’t find out how the uncle treated all this on his return? Allowed or allowable?