According to the tax authorities, as a result of termination of a life estate agreement, the taxpayer repurchases the real estate. Therefore, he or she needs to wait another five years in order to sell the property  without having to pay any tax, unless the proceeds from the sale are spent on their own residential purposes.

Revenues without costs

Marta Ignasiak, tax advisor at FKA Furtek Komosa Aleksandrowicz, also points out another very negative effect of dissolving a life estate agreement. It is probable that in the sale of the real estate, the tax authorities may not permit recognition of the real estate purchase costs as a tax deductible. Tax deductible costs can only be those costs of concluding an agreement that is aimed at dissolution of the life estate. As a result, when selling the real estate, the taxpayer needs to declare higher income for taxation purposes. 

Author: Mariusz Szulc
mariusz.szulc@infor.pl
Source: Dziennik Gazeta Prawna

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