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I have a client that is about the receive a transfer of property from her father. The market value is $1,200,000 with debt of $750,000. The cost basis is $100,000. The title will be in the daughters name with the father having a life estate interest.
The fathers counsel claims that the property will be included in the fathers estate upon death and that the property will be subject to estate tax (Not an issue because total estate will be under $2,000,000). The hope is that the property will have a step up in basis upon the fathers death. which should help avoid $1,100,000 in future taxable income to the daughter.
This does not smell right. How will this actually play out with the step up in basis rules.
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| Take a look at Section 2036 for the rules on inclusion of this asset in father's estate.
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