please wait, site is loading

Blog

Life Estate Agreement Sample

Opublikowano: kwiecień 10th, 2021 by foto-klinika |

The only guide to the service on this subject is in Ltr. Rul. 9329017. In the application for a decision, the taxpayer proposed to transfer the rest from a farm to charities with a court of life received. The property had a fair market value of $110,000 and was subject to an $80,000 mortgage. The service decided that the current value of the remaining interest would be calculated on the basis of the taxpayer`s equity — $30,000. In subsequent years, the subject would also have the right to charge additional deductions of public utility to the present value of the remaining interest attributable to the repayment of the principal. The service then decided that the taxpayer would realize the full amount of the debt to determine the profit made according to the rules of sale of good deals. This result was surprising because, unlike a gift that exempts the taxpayer from the obligation to pay, the taxpayer should, in this case, remain responsible for future mortgage payments under the donation contract! If the taxpayer had a low cost base, the profit could easily exceed the full contribution deduction.

In other words, the donor could assume a net tax debt on income and still has to pay the mortgages. However, a third option is for the donor to contribute to the balance of life and thus accelerate the donation of the rest of the interest. In such cases, the donor is entitled to an additional deduction of income tax to charity on the basis of the present value of his life or remaining life. To this end, the current value of the remaining interest is calculated on the fair value of the property at the time of the transfer of the retained life or maturity of the estate. The present value of the remaining interest is deducted from the fair value of the property to produce the present value of the remaining life or duration of the estate. This amount is qualified for the purpose of decompeting contributions. When a donor establishes a life farm contract in which he designates another person as a tenant, the donor has given the tenant a potentially taxable gift of withheld interest.