Page 18 THE EVERETT ADVOCATE – FRIDAY, DECEMBER 6, 2024 LINDERME AND GWYNN ESTATES: IMPLIED LIFE ESTATES The tax court case in Linderme v. Commissioner, 52 T.C. 305 (1969) clearly states that the value of real estate can still be includable in the decedent’s taxable estate even if there was no actual reserved life estate on the deed itself. For example, if a 90 year old man deeded his home to his 3 children and reserved a life estate on the deed itself, the fair market value of the real estate would become the new cost basis going forward in the names of the three children. The reserved life estate on the deed itself leaves no question as to whether or not the home is to be included in the gross estate for estate tax purposes. Once included in the gross taxable estate, the step-up in cost basis is achieved thereby providing for the new cost basis to be equal to the fair market value of the home at the time of death. When there is no life estate language on the deed itself, you have to look at the facts and circumstances along with the Linderme case and the Gwynn case (437 F.2nd 1148 (4th Circuit, 1971) in order to determine if the home would still be includable in the gross taxable estate. So long as the fair market value of the home is not greater than $2million, and assuming there are no other assets owned at the time of death, there would be no Massachusetts estate tax to be paid. Certainly no federal estate tax with the new $13.99million exemption amount as of 1-1-25. If the children sell for $2million, they would pay no capital gains tax as well. Therefore, as part of an estate plan/tax plan, we want the value of the home to be includable in the taxable estate of the decedent. The reason is that once the property is included in the taxable estate, under Internal Revenue Code Section 1014(a), we can achieve a step-up in cost basis equal to the fair market value at the time of death. It’s as if the children paid $2million for the property thereby resulting in no capital gain upon a subsequent sale. In the Linderme and Gwynn GET A FREE SUBSCRIPTION cases, there was no reserved life estate on the deed itself. The court found that there was an understanding on the part of all parties that the parent was to live in the home until death. The parent lived in the house rent free until the date of death. None of the children resided in the house with the parent. In the Linderme case, the father paid all of the monthly operating costs such as real estate taxes, water and sewer, homeowner’s insurance, repairs, etc., until the day he moved to a nursing home. At that point in time, the home remained vacant. While in the nursing home, the son continued to pay the monthly expenses with the father’s own money. Upon the death of the father, the house was sold, estate bills were paid and the net proceeds were split among the three children. The Judge ruled that the decedent retained the possession and enjoyment of the home until the day he died. The Judge found that there was indeed an understanding of all parties that this was the case. He found that the value of the home should be includible in his taxable estate under Internal Revenue Code Section 2036(1)(a). The decedent had exclusive possession of the home. There are times when you really want the real estate to be includible in the taxable estate so that a very large future capital gains tax can be avoided. These are two court cases to keep in mind in order to avoid, or greatly minimize, any future capital gains tax. TO MASSTERLIST – Join more than 22,000 people, from movers and shakers to political junkies and interested citizens, who start their weekday morning with MASSterList—the popular newsletter that chronicles news and informed analysis about what’s going on up on Beacon Hill, in Massachusetts politics, policy, media and influence. The stories are drawn from major news organizations as well as specialized publications. MASSterlist will be e-mailed to you FREE every Monday through Friday morning and will give you a leg up on what’s happening in the blood sport of Bay State politics. For more information and to get your free subscription, go to: https://massterlist.com/subscribe/ THE HOUSE AND SENATE: There were no roll calls in the House or Senate last week. The 2025-2026 legislative session is scheduled to begin in January. One of the fi rst orders of business in the Senate will be the adoption of the rules under which the Senate will operate during the next two years. One of the proposed changes that will be debated is an attempt by the Republican minority to make it more diffi cult for the Senate to conduct late-night sessions. The makeup of the new Senate will consist of 36 Democrats and four Republicans. Under current rules, a twothirds roll call vote is required for the Senate to conduct its session beyond 8 p.m. A separate twothirds roll call vote is required for the Senate to continue beyond midnight. For the 2023-2024 session, the Republicans proposed two changes to those rules. The fi rst would require a separate twothirds vote for the session to continue after 10 p.m. and go until midnight. The second would require a unanimous vote for the Senate to meet beyond midnight. “I voted in favor of these amendments as a check on how the Senate operates beyond normal business hours,” said Sen. Ryan Fattman (R-Sutton). “It’s important that these [changes take place] … going into the next legislative session, in order to discourage the habit of debating and passing legislation under the cover of darkness and bring more transparency to the legislative process.” “The Senate rejected a couple of rule changes in order to justify more secrecy,” said Paul Craney, a spokesperson for the Mass Fiscal Alliance. “It’s a tremendous disservice to the taxpayers and their constituents. The Senate should not be meeting in the very late or early morning hours to conduct their offi cial business. Unfortunately, in Massachusetts, the legislative process is very broken.” Opponents of the two new rules say the current Senate rules are suffi cient. “On rare occasions to complete critical work such as lowering housing costs or reforming the prescription drug industry, the Senate meets beyond regular business hours and into the evening,” said a spokesperson for Senate President Karen Spilka (D-Ashland). “Under the Senate rules approved by members for the [2023-2024 session], two-thirds of the members must vote in order to continue a session beyond 8 p.m. and twothirds must also vote in order to continue beyond midnight.” Here is how your local senators voted on the two new rules for the 2023-2024 session. The same two new rules will likely be considered by the incoming 20252026 session. REQUIRE A TWO-THIRDS VOTE TO GO BEYOND 10 P.M. Senate 4-34, rejected an amendment that would require a two-thirds vote for the Senate to continue any session beyond 10 p.m. and continue the session until midnight. This would be in addition to a current Senate rule that requires a two-thirds vote to continue a session beyond 8 p.m. and a two-thirds vote to continue a session beyond midnight. Amendment supporters said requiring the two-thirds vote will ensure that late-night sessions between 10 p.m. and midnight, when legislators are tired and many citizens are already sleeping, do not become the norm but are allowed only when a vast majority of senators favor it. Amendment opponents said the current rules requiring a twothirds vote to go beyond 8 p.m. and another two-thirds vote to go beyond midnight are sufficient and argued there is no need to add another layer. (A “Yes” vote is for requiring a two-thirds vote to go beyond 10 p.m. and continue until midnight. A “No” vote is against it.) Sen. Sal DiDomenico No REQUIRE UNANIMOUS VOTE TO GO BEYOND MIDNIGHT Senate 4-34, rejected an amendment that would require a unanimous vote for the Senate to continue any session beyond midnight. Current Senate rules require a two-thirds vote to go beyond midnight. Amendment supporters said sessions after midnight, when taxpayers are sleeping, and some members are barely awake, are irresponsible and should only be held if 100 percent of the senators agree there is a major emergency. Amendment opponents said going beyond midnight currently is only done when there is an emergency. They said it is often impossible to get a unanimous vote on anything and argued it is not wise to give a single member the power to essentially adjourn the Senate. (A “Yes” vote is for requiring a unanimous vote to go beyond midnight. A “No” vote is against requiring it.) Sen. Sal DiDomenico No ALSO UP ON BEACON HILL BAN NICOTINE AND TOBACCO – A trio of legislators announced they plan to co-sponsor legislation aimed at eventually ending the sale of all nicotine and tobacco products in the Bay State. Sen. Jason Lewis (D-Winchester) and Reps. Tommy Vitolo (D-Brookline) and Kate Lipper-Garabedian (D-Melrose) BEACON | SEE PAGE 19
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