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Is this life estate taxable?

Mister M was a member of the Jehovah Witness Governing Body. He was one of ten in that most senior position. In February, it was announced that he was no longer a member of that group. Was he fired? Did he quit? Nobody knew, but speculation ran rampant. In 100 years, he was only the fourth(?) person to leave the Governing Body without dying. Well, it's been discovered that the Jehovah Witness organization has bought a condo in North Carolina and M and his wife have a life estate in that property. Effectively, they own it until their death and then the property reverts to the "remainder interest", in this case the Jehovah Witness organization of Walkill, NY. I consider that life estate to be part of a severance package. How taxable is it? If we assume the value of that life estate to be $150k, is that all taxable NOW, or say $10k per year while they live there?

Reply to
Rodney Farber
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Assuming the life estate was given as compensation, then yes, it's taxable - probably subject to withholding/self-employment tax as well. I'd think it's value should be all taxed in the year the life estate was created. In the past there was a way to stretch large sums of income out over a number of years (income averaging). But that no longer exists. So it's unlikely they'd be allowed to recognize it as income a bit at a time.

Reply to
Stuart O. Bronstein

According to Rodney Farber snipped-for-privacy@gmail.com:

Do they still consider him to be clergy? If so, I'd expect it to be non-taxable per the parsonage allowance.

Reply to
John Levine

While I agree with John, just to be clear = parsonage allowance is non-taxable for income tax purposes, but it remains taxable for Self-Employment tax purposes.

Ira Smilovitz, EA Leonia, NJ

Reply to
ira smilovitz

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