Taxpayer inherited a life estate in real estate. Remainderman is a trust. Is taxpayer entitle to a depreciation deduction? How do you establish basis? Present value based on life of taxpayer?
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9 years ago
Life Estate in Real Estate
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- posted
9 years ago
I don't specifically know, but I don't see any reason why not - assuming you are using the property for business purposes.
The basis would be the total value based on the donor's date of death, and actuarialy adjusted based on the life estate holder's age. However if the normal useful life is less than the holder's actuarial lifespan, then it would probably be the shorter useful life time that would be used to depreciate the property.
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9 years ago
I don't know why this did not post, so I am trying again.
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9 years ago
It depends. According to IRS Publication 946, the life tenant can generally take depreciation as if he were the absolute owner. However, there is a big, big "BUT" (also from Pub 946):
CERTAIN TERM INTERESTS IN PROPERTY. You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust.
So presumably if the trust in question has close enough ties to relatives of the life tenant, the life tenant will not be able to depreciate the property.