Death In Family And Sale Of Home Tax ?
I will try to make this short...my mom passed away in June and I just sold her home. I have 5 brothers and sisters and the proceeds will be split between the 6 of us. It will work out to about $7,000 each or about a total of $42,000 that was made on the home. How do I determine what or how much the taxes will be or will we even have to pay taxes?
Thank you for you help in this matter. I appriciate everyone here and all of the knowledge is incrediable!
Your gain would be the total sales price less any expenses involved with the sale, less the fair market value of the house on the date of death. It would be long term capital gain reported on Sch D. If all six inheirited the house, the gain would be split 6 ways. If you sold the house 4 months after the date of death, the gain should be minimal, if any.
thank you for the information...
I guess when I do my moms taxes for 2004, it would not be considered income to her since she did not get the money...the house is in my name now that she is gone, we did a benificiary deed to transfer the ownership, and I will receive the check so would I need to send my brothers and sisters a 1099 or how would I need to show that it was divided between 6 people?
Actually the sale should be reported on a estate income tax return and the capital gain would be reported on a Form K-1 d issued to each beneficiary. I suggest you hire a tax professional to report the sale, won't cost much if you provide all the information up front. Include on the estate return and other income and deduct any expense of the estate since the date of death. The gain should be little if any: after deducting closing costs probably a loss.
If the property was in your mom's or the estate's name at the time of sale, I would say you need to file an estate income tax return (Form 1041). If it had already been distributed to you before the sale, it would go on your return. How to show the distribution of the proceeds to the other 5, I'm not sure. This may be the year you would want to see a CPA. You probably don't need the most expensive CPA in town but someone who has seen this situation before. Go see them now before they get too busy!
I forgot - don't forget to have the other 5 siblings chip in for the cost of the CPA! : )
Although (as my better hafl would freely state) I'm sure no accountant or tax expert, I do know this:
The heirs' acquistion value for that property is "stepped up" to its market value at date of death.
So, if the house had been acquired years ago for $15,000, but on the DOD, had a current market value of $150,000 (I know of some like this), the heirs would only be taxed on their sales price received minus its market value as of DOD.
Use to be, and could be again, depending on and shifts in the policital wind, that the RE's value was "acquisition value", and as you can quickly see, that wasn't popular with heirs anywhere.
Under AV rules, if heirs sold for $150,000, they'd be taxed on $135,000 of taxable gain, as the AV had been $15,000..
OUCH!
wow..I really appriciate all of the responses.
Basically I setup an account under "The Estate of My Mom's Name" and transfered all of her money (about $11,500) into the account with me as the account "manager" or whatever it's called. I have been using this account to pay the mortgage, utilities, etc. My mom bought the house for $115,000 two years ago, she died on June 24th 2004. She put money down on the house so there is only about $90,000 owed. I sold the house for $135,000, so basically we made $20,000 on the house, and there is about $9,000 left in her account. This total amount will be divided between 6 siblings, and two of them were paid $5,000 from a loan they gave my mom. There is a lot of things that seem to be involved with this, so I think the best way to go is hire a CPA at this point.
Anyone know a good reasonable CPA in Phoenix Arizona?
Thank you all again for all of you help! You have all been very helpfull during this time of grief in our lives.