Life Estate Agreement - Two Life

Prepared for: Donor name

A. Input Assumptions
Date of Transfer August 12, 2020
Nearest age on the date of the gift for Life Tenant 1 is 82
Nearest age on the date of the gift for Life Tenant 2 is 80
Fair market value of property transferred $400,000.00
Current value of depreciable property (improvements) $360,000.00
Estimated useful life of depreciable property in years 40 years
Expected salvage value of depreciable property (improvements) $100,000.00
The discount rate (effective 8/2020) is 0.4%
The mortality table is based on the census taken in 2000
B. Calculation of Income Tax Deduction
1. Current fair market value of life estate property $400,000.00
2. Current value of depreciable portion of life estate property $360,000.00
3. Salvage value of depreciable life estate property $100,000.00
4. Portion of property considered to be depreciable (Line 2 minus Line 3) $260,000.00
5. Net value of property not subject to depreciation (Line 1 minus Line 4) $140,000.00
6. Remainder interest factor based on tenant ages -1
7. Remainder interest factor for real property which depreciates -1
8. Value of remainder interest in real property
  (a) Value not subject to depreciation (Line 5 * Line 6) $-140,000.00
  (b) Value subject to depreciation (Line 4 * Line 7) $-260,000.00
  (c) Total value of remainder interest (Line 8(a) + Line 8(b)) (the tax deduction) $-400,000.00

NOTE: This calculation is provided for educational purposes only. The type of assets transferred, the actual date of the gift, and other factors may have a material effect on the amount or use of your deduction. You are advised to seek the advice of your tax advisors before implementing a gift of this type.