We are selling a house that is in a life estate and the life tenant is still living. When the proceeds are paid to the 3 remainderman this money will

In response to your inquiry, the first step in your sales analysis is determining how much of the proceeds of sale belong to the life tenant and which portion belongs to the remaindermen.  This is determined by using the IRS tables and applicable 7520 interest rates and age of the life tenant to determine the portion of the proceeds which are apportioned to the life tenant.  The remaining portion of proceeds belong to the remaindermen. If the life tenant qualifies to have their portion of proceeds of sale excluded from capital gains due to the $250,000.00 exclusion, then capital gains may be avoided on that portion of the proceeds.  As far as the remaindermen are concerned, if the property is not their primary residence, the provided the rules on 1031 exchanges are followed, the remaindermen can defer the capital gains that are attributable to the sale in a tax deferred exchange. It may be possible to utilize the property you currently own jointly with him as his replacement property but consultation should be had with your tax professional and attorney who concentrates in this area so as not to violate any of the 1031 rules regarding tax deferred exchanges. - Alfred Polizzotto, III