Elder care tax question(s)

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CRTR
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Elder care tax question(s)

Post by CRTR » Tue Oct 09, 2018 3:59 pm

Things just got a little more complicated for me from a tax perspective. I'm a recent retiree and have an elderly mother (90 this year). She lives in an assisted living/certified memory care facility in San Diego. She officially ran out of money earlier this year. For the past 10 years or so, I have been 'gifting' her amounts equal to the annual gift tax exclusion (in the form of my lowest basis equities), hoping to delay/avoid what's happened most recently. She receives ~$20k/year in Social Security. Last year, her total expenses were ~$84000. We can expect her expenses to rise 4-5%/year, as they have in each of the past 9 years (when private equity purchased her Continuing Care Community). She has been diagnosed with dementia and has a formal care plan at her facility. They take great care of her. She's very happy and will spend the rest of her life there. I can afford to cover her but would like to maximize any tax benefits possible . . . . I love my mother but, my government, not so much . .. . Here are my questions:

1. Going forward, can I declare her as a dependent on my taxes because I cover >50% of her expenses?
2. 100% of her monthly fee (all $84k/year) is deductible because of her presence in the memory care unit is part of a formal, medical care plan?
3. As I will be paying >$60k/year of her bills, do I have to file a gift tax return for the amount over $15k?
4. I own a rental property in Idaho. If I sign the title over to her (and file a gift tax return), the existing adjusted basis carries over to her (FMV ~$650k, ~$150K depreciation recapture, purchase price + improvements ~$410K). When she dies, I will inherit the property back and receive a step-up in basis to FMV at her DOD? (I'm her only heir).

Thank you in advance. Any thoughts will be most appreciative!

cas
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Re: Elder care tax question(s)

Post by cas » Tue Oct 09, 2018 6:35 pm

CRTR wrote:
Tue Oct 09, 2018 3:59 pm

3. As I will be paying >$60k/year of her bills, do I have to file a gift tax return for the amount over $15k?
Since no one else has said anything, here is a vague and not very comprehensive comment: I'm pretty sure I've read somewhere in IRS literature that anyone can pay anyone else's medical bills (directly to the provider of the medical services) without it being considered a gift for gift tax/annual gift exclusion purposes. My first guess would be that I read it in the gift tax return instructions, so that might be a place to look for further information.

Ah, yes, here is what I was thinking of. This is from the Form 709 instructions (
https://www.irs.gov/instructions/i709#i ... 1977750640 ). Of course, this still leaves with with your existing question on which of your mother's expenses would count as "medical" for income tax deduction purposes. And I didn't read far enough to see if you still had to file the Form 709 (but everything ends up not counting as a gift) or not.
Medical exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.
The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee's insurance. If payment for a medical expense is reimbursed by the donee's insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you are considered to have made a gift to the donee of the reimbursed amount.

To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made and may be offset by the annual exclusion if it is otherwise available.

The medical and educational exclusions are allowed without regard to the relationship between you and the donee. For examples illustrating these exclusions, see Regulations section 25.2503-6(c).

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Artsdoctor
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Re: Elder care tax question(s)

Post by Artsdoctor » Tue Oct 09, 2018 6:50 pm


delamer
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Re: Elder care tax question(s)

Post by delamer » Tue Oct 09, 2018 6:54 pm

When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.

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Artsdoctor
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Re: Elder care tax question(s)

Post by Artsdoctor » Tue Oct 09, 2018 7:02 pm

delamer wrote:
Tue Oct 09, 2018 6:54 pm
When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.
With advanced care (full nursing home care, for example), it's going to be pretty close to 100% deductible. They'll give you a printout. It's the assisted living level where things are unpredictable (perhaps 40-60% deductible but everything's very well itemized), and some CCRC's will have non-deductible portions regardless of level of care.

Nate79
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Re: Elder care tax question(s)

Post by Nate79 » Tue Oct 09, 2018 7:15 pm

#4 is an easy no. That is a clear step transaction as far as I'm aware.

Bubbacat
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Re: Elder care tax question(s)

Post by Bubbacat » Tue Oct 09, 2018 7:38 pm

Might be a good idea to consult with an elder law attorney - they often pair with CPAs who can address tax considerations.

http://www.nelf.org/find-a-cela/

Bubbacat

RetiredArtist
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Re: Elder care tax question(s)

Post by RetiredArtist » Tue Oct 09, 2018 8:39 pm

An older relative was able to deduct in-home care, as a medical expense. He had a written plan of care that was approved by his doctor, stating that the care was medically necessary. The caregiving agency wrote up the plan. I found IRS Publication 502, and showed it to to the CPA. He agreed the caregiving was necessary, and deductible.

From IRS Publication 502:

Long-Term Care
You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts.
Qualified Long-Term Care Services

Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are:

1. Required by a chronically ill individual, and

2. Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.

1. He or she is unable to perform at least two activities of daily living without substantial assistance from an-other individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.

2. He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.


Maintenance and personal care services. Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment

Publication 502 (2013) Page 11

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:01 am

delamer wrote:
Tue Oct 09, 2018 6:54 pm
When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.
When she was in the regular assisted living section, they used to provide the same. It's a good idea. I'll call the business office this AM and see what they recommend. Thanks

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:05 am

Nate79 wrote:
Tue Oct 09, 2018 7:15 pm
#4 is an easy no. That is a clear step transaction as far as I'm aware.
That's unfortunate because I planned to put the rental property in her name anyway. In effect, she's going to receive 100% of the rent proceeds plus some cash supplementation to cover her overhead anyway. Would have been nice to get a tax benefit too.

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:08 am

RetiredArtist wrote:
Tue Oct 09, 2018 8:39 pm
An older relative was able to deduct in-home care, as a medical expense. He had a written plan of care that was approved by his doctor, stating that the care was medically necessary. The caregiving agency wrote up the plan. I found IRS Publication 502, and showed it to to the CPA. He agreed the caregiving was necessary, and deductible.

From IRS Publication 502:

Long-Term Care
You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts.
Qualified Long-Term Care Services

Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are:

1. Required by a chronically ill individual, and

2. Provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Chronically ill individual. An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.

1. He or she is unable to perform at least two activities of daily living without substantial assistance from an-other individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.

2. He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.


Maintenance and personal care services. Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment

Publication 502 (2013) Page 11
I just pulled up Pub 502. Sounds like 100% of the cost is deductible because she has been diagnosed with dementia and she lives in a special memory care unit. I'll confirm with the facility today. Thank you!!

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:18 am

Artsdoctor wrote:
Tue Oct 09, 2018 6:50 pm
You might want to start here:

https://turbotax.intuit.com/tax-tips/fa ... /L34jePeT9
That was perfect. So, if I gift her the rental unit, no declaring her as a dependent because her social security and the rental income will cover over 50% of her expenses. Thanks!!

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:24 am

Bubbacat wrote:
Tue Oct 09, 2018 7:38 pm
Might be a good idea to consult with an elder law attorney - they often pair with CPAs who can address tax considerations.

http://www.nelf.org/find-a-cela/

Bubbacat
Thanks for the link. Between Nate79's comment and some other estate questions too, looks like I'm going to need a lawyer or two after all. Was hoping to avoid it but life's like that sometimes . . .

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 8:27 am

cas wrote:
Tue Oct 09, 2018 6:35 pm
CRTR wrote:
Tue Oct 09, 2018 3:59 pm

3. As I will be paying >$60k/year of her bills, do I have to file a gift tax return for the amount over $15k?
Since no one else has said anything, here is a vague and not very comprehensive comment: I'm pretty sure I've read somewhere in IRS literature that anyone can pay anyone else's medical bills (directly to the provider of the medical services) without it being considered a gift for gift tax/annual gift exclusion purposes. My first guess would be that I read it in the gift tax return instructions, so that might be a place to look for further information.

Ah, yes, here is what I was thinking of. This is from the Form 709 instructions (
https://www.irs.gov/instructions/i709#i ... 1977750640 ). Of course, this still leaves with with your existing question on which of your mother's expenses would count as "medical" for income tax deduction purposes. And I didn't read far enough to see if you still had to file the Form 709 (but everything ends up not counting as a gift) or not.
Medical exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.
The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee's insurance. If payment for a medical expense is reimbursed by the donee's insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you are considered to have made a gift to the donee of the reimbursed amount.

To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made and may be offset by the annual exclusion if it is otherwise available.

The medical and educational exclusions are allowed without regard to the relationship between you and the donee. For examples illustrating these exclusions, see Regulations section 25.2503-6(c).
I had forgotten all about that exclusion! This is perfect! Thank you!!!

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dodecahedron
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Re: Elder care tax question(s)

Post by dodecahedron » Wed Oct 10, 2018 8:54 am

There are two possible ways in which your mother might be your dependent:

1) If you provide more than 50% of her support AND her total gross income in 2018 is less than $4,150, then she is likely your ¨Qualifying Relative dependent.¨

2) If you provide more than 50% of her support AND her gross income is greater than $4,150, then she may be your ¨medical dependent¨.

Note that gross income for this purpose only includes her Social Security to the extent that it is included in her AGI. Many seniors who might be collecting tens of thousands in SS may not have any gross SS income if their non-SS income is low.

Under either #1 or #2 above, you would be eligible to include your payments for your mom´s medical expenses in your itemized Schedule A deductions. Also under either #1 or #2, you could use funds in your HSA to pay for your mom´s medical expenses without incurring taxes or penalties.

The main difference between #1 and #2 above is that under #1, you could also claim a $500 tax credit on your tax return. Also, if you are unmarried, under #1 you might be eligible to claim HoH filing status.

delamer
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Re: Elder care tax question(s)

Post by delamer » Wed Oct 10, 2018 10:31 am

CRTR wrote:
Wed Oct 10, 2018 8:01 am
delamer wrote:
Tue Oct 09, 2018 6:54 pm
When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.
When she was in the regular assisted living section, they used to provide the same. It's a good idea. I'll call the business office this AM and see what they recommend. Thanks
Please let us know what you find out.

I am wondering about items such as basic food, basic housekeeping, and cable tv provided as part of the monthly fee.

Speaking purely as a taxpayer, I don’t see why those should be allowable as medical deductions.

I get those when I stay at Hampton Inn.

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 1:09 pm

delamer wrote:
Wed Oct 10, 2018 10:31 am
CRTR wrote:
Wed Oct 10, 2018 8:01 am
delamer wrote:
Tue Oct 09, 2018 6:54 pm
When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.
When she was in the regular assisted living section, they used to provide the same. It's a good idea. I'll call the business office this AM and see what they recommend. Thanks
Please let us know what you find out.

I am wondering about items such as basic food, basic housekeeping, and cable tv provided as part of the monthly fee.

Speaking purely as a taxpayer, I don’t see why those should be allowable as medical deductions.

I get those when I stay at Hampton Inn.
Just got off the phone with the business office. This woman clearly has been asked a lot of these questions before and she was on her game. She even emailed me links to IRS pubs supporting her advice. Here are some of the things we covered:

1. Step Doctrine/House transfer. She stated it is has been a common practice among residents and family -- with estate planning attorney approval -- in the past. Hmmmm . . . .I kinda think it would be a Step Transaction. Guess I need a professional. She gave me the names of some local Estate Planning specialist attorneys. I put in a couple calls and will follow up after I speak with one.

2. Dependent deduction: as DODECAHEDRON already pointed out, that hinges on whether I pay over 50% of her support. If I gift her the rental unit, the rent proceeds plus her social security will cover exceed 50%. If I don't giver her the rental unit, she will qualify as a dependent.

3. Gift tax return: as CAS pointed out, no need for Gift Tax filing as long as I pay the facility directly, from my own account.

4. Facility cost tax deduction: as others have pointed out and in her CCC, for assisted living residences, the CCC supplies an annual itemized statement. Thankfully, that doesn't apply to her situation. The difference in my Mom's situation is that she is in a State Certified Memory Care Unit as part of a formal and doctor prescribed medical plan. She has severe cognitive impairment and HAS to live in such a facility. Per RetiredArtist's post and IRS Pub 502, it follows that the ENTIRE FACILITY FEE is deductible on her tax return. Food and housekeeping included because she is unable to do so herself. If she were in a Nursing Home or hospital for the same reason, the entire fee would be deductible as well. Cable TV and telephone are NOT deductible in her case as I pay those companies directly. If they were included in her facility fee, they would be. I guess the difference is that you stay at the Hampton House by choice whereas she does not.


I'll follow up about the step doctrine after I speak with an attorney.

THANKS everyone for all the help!!!!

delamer
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Re: Elder care tax question(s)

Post by delamer » Wed Oct 10, 2018 1:15 pm

CRTR wrote:
Wed Oct 10, 2018 1:09 pm
delamer wrote:
Wed Oct 10, 2018 10:31 am
CRTR wrote:
Wed Oct 10, 2018 8:01 am
delamer wrote:
Tue Oct 09, 2018 6:54 pm
When my mother was living in a CCRC, the facility provided a breakdown each year as to what portion of her monthly fee was a medical deduction for tax purposes.

I would check with the facility. I doubt that the whole fee is deductible.
When she was in the regular assisted living section, they used to provide the same. It's a good idea. I'll call the business office this AM and see what they recommend. Thanks
Please let us know what you find out.

I am wondering about items such as basic food, basic housekeeping, and cable tv provided as part of the monthly fee.

Speaking purely as a taxpayer, I don’t see why those should be allowable as medical deductions.

I get those when I stay at Hampton Inn.
Just got off the phone with the business office. This woman clearly has been asked a lot of these questions before and she was on her game. She even emailed me links to IRS pubs supporting her advice. Here are some of the things we covered:

1. Step Doctrine/House transfer. She stated it is has been a common practice among residents and family -- with estate planning attorney approval -- in the past. Hmmmm . . . .I kinda think it would be a Step Transaction. Guess I need a professional. She gave me the names of some local Estate Planning specialist attorneys. I put in a couple calls and will follow up after I speak with one.

2. Dependent deduction: as DODECAHEDRON already pointed out, that hinges on whether I pay over 50% of her support. If I gift her the rental unit, the rent proceeds plus her social security will cover exceed 50%. If I don't giver her the rental unit, she will qualify as a dependent.

3. Gift tax return: as CAS pointed out, no need for Gift Tax filing as long as I pay the facility directly, from my own account.

4. Facility cost tax deduction: as others have pointed out and in her CCC, for assisted living residences, the CCC supplies an annual itemized statement. Thankfully, that doesn't apply to her situation. The difference in my Mom's situation is that she is in a State Certified Memory Care Unit as part of a formal and doctor prescribed medical plan. She has severe cognitive impairment and HAS to live in such a facility. Per RetiredArtist's post and IRS Pub 502, it follows that the ENTIRE FACILITY FEE is deductible on her tax return. Food and housekeeping included because she is unable to do so herself. If she were in a Nursing Home or hospital for the same reason, the entire fee would be deductible as well. Cable TV and telephone are NOT deductible in her case as I pay those companies directly. If they were included in her facility fee, they would be. I guess the difference is that you stay at the Hampton House by choice whereas she does not.


I'll follow up about the step doctrine after I speak with an attorney.

THANKS everyone for all the help!!!!
Thank you for all the information.

Good luck with your planning.

clydewolf
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Re: Elder care tax question(s)

Post by clydewolf » Wed Oct 10, 2018 1:25 pm

There is no deduction for dependents. But you can claim any medical deduction.

bsteiner
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Re: Elder care tax question(s)

Post by bsteiner » Wed Oct 10, 2018 1:27 pm

CRTR wrote:
Wed Oct 10, 2018 1:09 pm
...
1. Step Doctrine/House transfer. She stated it is has been a common practice among residents and family -- with estate planning attorney approval -- in the past. Hmmmm . . . .I kinda think it would be a Step Transaction. ...
Wouldn't that depend on the facts?

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 1:55 pm

bsteiner wrote:
Wed Oct 10, 2018 1:27 pm
CRTR wrote:
Wed Oct 10, 2018 1:09 pm
...
1. Step Doctrine/House transfer. She stated it is has been a common practice among residents and family -- with estate planning attorney approval -- in the past. Hmmmm . . . .I kinda think it would be a Step Transaction. ...
Wouldn't that depend on the facts?
So, just got off the phone with the first attorney. Unfortunately, he punted on the project because he is not familiar with Idaho law in regards to real property (where the rental property is) but he did offer some insight on the Step Doctrine issue:

In his opinion, in this case, it is not a step transaction for the following reasons. He said it would fail an Interdependence Test (whatever that is) because each of the two steps has its own significance. She will receive all income form the property until her death. In addition, her creditors can go after it as well. It would also fail the Results Test because there is not a single overarching transaction. The primary intent of the gift is not to avoid paying the depreciation recapture and capital gains, it is to give her an income producing asset to offset her living expenses. He added that she has to own it for over 1 year or the gift will be voided per Section 1014(e). If I were to gift property to her, live in it without paying rent, and later inherit it, that would qualify as a step transaction . . . sigh

So, I've got a call into a Boise Legal Group that specializes in estate planning and elder law. I hope they help me settle the last bit of this . . .

LOL, why is it the more I learn about Step Transactions the more confused I get??

bsteiner
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Re: Elder care tax question(s)

Post by bsteiner » Wed Oct 10, 2018 2:10 pm

CRTR wrote:
Wed Oct 10, 2018 1:55 pm
bsteiner wrote:
Wed Oct 10, 2018 1:27 pm
CRTR wrote:
Wed Oct 10, 2018 1:09 pm
...
1. Step Doctrine/House transfer. She stated it is has been a common practice among residents and family -- with estate planning attorney approval -- in the past. Hmmmm . . . .I kinda think it would be a Step Transaction. ...
Wouldn't that depend on the facts?
So, just got off the phone with the first attorney. Unfortunately, he punted on the project because he is not familiar with Idaho law in regards to real property (where the rental property is) but he did offer some insight on the Step Doctrine issue:

In his opinion, in this case, it is not a step transaction for the following reasons. He said it would fail an Interdependence Test (whatever that is) because each of the two steps has its own significance. She will receive all income form the property until her death. In addition, her creditors can go after it as well. It would also fail the Results Test because there is not a single overarching transaction. The primary intent of the gift is not to avoid paying the depreciation recapture and capital gains, it is to give her an income producing asset to offset her living expenses. He added that she has to own it for over 1 year or the gift will be voided per Section 1014(e). If I were to gift property to her, live in it without paying rent, and later inherit it, that would qualify as a step transaction . . . sigh

So, I've got a call into a Boise Legal Group that specializes in estate planning and elder law. I hope they help me settle the last bit of this . . .

LOL, why is it the more I learn about Step Transactions the more confused I get??
That was a good response.

My guess is that you find the step transaction doctrine confusing because it's fact sensitive.

How is this state-specific?

Nate79
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Re: Elder care tax question(s)

Post by Nate79 » Wed Oct 10, 2018 3:45 pm

Concerning the step transaction you clearly wrote in your OP that you are from the very beginning looking to give it to her and get a step up in basis on her death.
4. I own a rental property in Idaho. If I sign the title over to her (and file a gift tax return), the existing adjusted basis carries over to her (FMV ~$650k, ~$150K depreciation recapture, purchase price + improvements ~$410K). When she dies, I will inherit the property back and receive a step-up in basis to FMV at her DOD? (I'm her only heir).
Would you be ok if she created a will and left the home to someone else? Should be no problem right because it's a gift and once it's a gift you should not expect to receive it back.

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Wed Oct 10, 2018 4:35 pm

Nate79 wrote:
Wed Oct 10, 2018 3:45 pm
Concerning the step transaction you clearly wrote in your OP that you are from the very beginning looking to give it to her and get a step up in basis on her death.
4. I own a rental property in Idaho. If I sign the title over to her (and file a gift tax return), the existing adjusted basis carries over to her (FMV ~$650k, ~$150K depreciation recapture, purchase price + improvements ~$410K). When she dies, I will inherit the property back and receive a step-up in basis to FMV at her DOD? (I'm her only heir).
Would you be ok if she created a will and left the home to someone else? Should be no problem right because it's a gift and once it's a gift you should not expect to receive it back.
Not exactly sure what your point is . . . . If by "looking to give" you mean considering/thinking about, that is correct. If by "looking to give" you mean my primary purpose for giving the rental unit to her is to avoid taxes, you are mistaken. The reality is that I have to give up something to pay her overhead. I can give her cash, equities, rental property, my boat or cut a check directly to the facility. No matter how you slice it, I lose something. I tentatively chose the rental property because, of all the options, it seemed to make the most financial sense for me. On the other hand I wasn't sure which is why I asked the Boglehead community for help. Again, the primary goal/purpose of the gift is to help cover her living expenses not set up a tax dodge. As can be seen from the thoughtful responses above, It doesn't matter which way I choose to cover her, there will be tax benefits for me. You (or the IRS) can't blame me for trying to do what's least costly for me as well.
As for you last question, it certainly will be within her right. She also can re-marry and the unit will pass to her new husband. I can give it to her, she can qualify for Medicaid and the state can take it after she dies. . . . . that doesn't mean I'll be happy about any of those though.
My most recent understanding of the Step Doctrine is that my expecting to get it back doesn't void the transaction . . . the fact is that each step in the process has its own purpose. The sum of the steps is much more than the end result. This is what both attorneys called the "Interdependence Test". I'm going to take their word for it . . .

hifromsocal
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Re: Elder care tax question(s)

Post by hifromsocal » Tue Oct 16, 2018 12:54 pm

I apologize since I did not read all of the responses closely. However have you consider signing your mom up for Medi-cal? It appears she qualifies for it and if that is the case, then you would not need to pay for all this. The only thing I do not know is if she can stay in the care facility she currently resides at. I know you mentioned that she was happy where she is. Good luck to you. I think many of us may be in a similar situation so I feel for you.

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celia
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Re: Elder care tax question(s)

Post by celia » Tue Oct 16, 2018 1:36 pm

If you were to gift her the rental and you die before her, what kind of mess will you be leaving behind? Is your estate plan up to date?

Ben10
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Re: Elder care tax question(s)

Post by Ben10 » Tue Oct 16, 2018 6:53 pm

CRTR wrote:
Tue Oct 09, 2018 3:59 pm

4. I own a rental property in Idaho. If I sign the title over to her (and file a gift tax return), the existing adjusted basis carries over to her (FMV ~$650k, ~$150K depreciation recapture, purchase price + improvements ~$410K). When she dies, I will inherit the property back and receive a step-up in basis to FMV at her DOD? (I'm her only heir).

If she dies within a year of the transfer you will get a carryover basis in the property, not a step-up. That is, assuming the property gets back to you.

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Re: Elder care tax question(s)

Post by SoAnyway » Tue Oct 16, 2018 10:36 pm

celia wrote:
Tue Oct 16, 2018 1:36 pm
If you were to gift her the rental and you die before her, what kind of mess will you be leaving behind? Is your estate plan up to date?
+1.

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Thu Oct 25, 2018 6:08 pm

celia wrote:
Tue Oct 16, 2018 1:36 pm
If you were to gift her the rental and you die before her, what kind of mess will you be leaving behind? Is your estate plan up to date?
A good point and it is. My executor is my childhood best friend and his son is secondary. The two main beneficiaries are local Humane society facilities and they have copies of my trust.

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Re: Elder care tax question(s)

Post by CRTR » Thu Oct 25, 2018 6:09 pm

Ben10 wrote:
Tue Oct 16, 2018 6:53 pm
CRTR wrote:
Tue Oct 09, 2018 3:59 pm

4. I own a rental property in Idaho. If I sign the title over to her (and file a gift tax return), the existing adjusted basis carries over to her (FMV ~$650k, ~$150K depreciation recapture, purchase price + improvements ~$410K). When she dies, I will inherit the property back and receive a step-up in basis to FMV at her DOD? (I'm her only heir).

If she dies within a year of the transfer you will get a carryover basis in the property, not a step-up. That is, assuming the property gets back to you.
Yes, I am aware of that. I'll be right back to where I started, which, in the whole scheme of things, is fine too.

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Thu Oct 25, 2018 6:10 pm

celia wrote:
Tue Oct 16, 2018 1:36 pm
If you were to gift her the rental and you die before her, what kind of mess will you be leaving behind? Is your estate plan up to date?
It sure is. Answered above

CRTR
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Re: Elder care tax question(s)

Post by CRTR » Thu Oct 25, 2018 6:13 pm

hifromsocal wrote:
Tue Oct 16, 2018 12:54 pm
I apologize since I did not read all of the responses closely. However have you consider signing your mom up for Medi-cal? It appears she qualifies for it and if that is the case, then you would not need to pay for all this. The only thing I do not know is if she can stay in the care facility she currently resides at. I know you mentioned that she was happy where she is. Good luck to you. I think many of us may be in a similar situation so I feel for you.
Thank you for the idea. I did look into that. Unfortunately, the facility in which she resides does not accept just Medical. She would have to move and I'm not going to put her thru that. It is a nice place and they do a great job taking care of her. It is a for-profit, private equity owned facility. There is a wait list to get in. I have no leverage . .

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