Leaderboard

Thanks, DANRVAN and Gail! My advice to her is to see an attorney first to get the deed and ownership straightened out, and with the attorney, figure out a sale plan. I'll take over her taxes after all is straightened out. Thank you all again! --Rick

It sounds like H and W meet the requirements for the full exclusion - they both lived there two of the last five years, and W owned tow of the last five years. However, I agree that an attorney needs to be involved to determine portion owned by estate of B, and how the property basis and proceeds have to be treated. Was this considered a gift to B at the time he was put on the deed? Is the estate gifting the property back to W ? Too many questions unanswered.

Attorney for sure, given the dollar amount involved she needs legal advice which we as CPA's cannot give out. Although a moot point now, why was that necessary? Was an attorney involved? The estate may or may not have any ownership depending on whether B held Joint Tenancy or Tenancy in Common, that is where legal advice is needed.

This partly a legal issue and partly a tax issue. I would want something definitive from the Attorney in writing.

The IRS' position will be that THEY should have been paid FIRST, and it that left insufficient funds for other creditors, too bad/so sad with a side dose of tough noogies. They're gonna have to pony up, and they should never have paid off the other creditors first. They could have gotten other creditors to take a percentage of what was owed - happens all the time when there are insufficient funds in an estate for full payment - but they'll never get money back.

The allowable loss is 45,000 - 30,000 = 15,000. Section 469 does not change the amount of step up in basis.

Sorry, CBSLEE. I misunderstood your question. Let me provide some updated info: Here are the UPDATED FACTS: Single family home occupied by Husband (H) and Wife (W) for forty years. They always file a joint tax return. Deed for home shows ownership as W and a COMPLETELY UNRELATED THIRD PART (B). H is not on the deed for irrelevant reasons. B was added to the deed twenty years ago solely to ensure that there were two names on the deed. B has no involvement in the home and does not live there. B DIED LAST MONTH AND LEFT A WIFE, NO KIDS. Home is NOT YET SOLD (ONLY IN THE PLANNING-FOR-SALE STAGE). Per Pub 523, "amount realized" WOULD BE $1,000,000. "Adjusted basis" WOULD BE $100,000 yielding a $900,000 gain. Per Pub 523--Determine whether you meet the ownership requirement: If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement. I still have these questions, if you'd like to take a shot at them (ASSUMING A QUIT CLAIM DEED IS ISSUED BY B's ESTATE AND ONLY W REMAINS ON THE DEED): What is the "amount realized" and "adjusted basis" on H and W joint tax return? What is H and W's excluded gain on their joint 1040? SAME QUESTIONS, THIS TIME ASSUMING EITHER B's ESTATE OR B's WIFE REPLACES B ON THE DEED: What is the "amount realized" and "adjusted basis" on H and W joint tax return? What is H and W's excluded gain on their joint 1040? It probably would be best for W to see an attorney and/or CPA to straighten out this mess! Thank you for your help! --Rick

Not much to pay back? That could be $10k a month! I am totally with you that it's just not right for people to give away all their money to family so we, the taxpayers who have less than they do, will pay for their care. The look-back rule has helped somewhat. Yet I have seen what you are seeing--staff in senior care facilities and even attorneys advising people to get rid of their money. Often that person is old and frail and likely to need care within months, so it's totally inappropriate advice coming way too late. I know you don't care if the attorney gets paid or not, but the way laws are written (by attorneys, of course) I believe their fees are priority debts. Just hope the heirs didn't spend everything yet. You won't need to file a 1041 unless the estate had more than $600 in income. You might want to wait to file the decedent's final return until you learn how much will be paid back to Medicaid. Say it is $30k. That amount can then be deducted as medical expenses on the decedent's final return, which may lower the tax bill. (There is an election to claim the decedent's medical expenses paid after death on the final 1040.)

I like your idea of new engagement letters for instance: 1. Personal tax returns for someone no longer with us 2. Gift tax return 3. Estate tax return 4. Representation & Consultation WITH A RETAINER REQUIRED FOR EACH.

Jerry W is absolutely correct. No money is to be distributed from the estate until all the bills are paid. If the beneficiaries took the cash before the creditors, they are indeed liable for the bills. Don't even think OIC, the law is pretty clear. In this case, it may be that the money was distributed before the taxpayer died? If so, were gift tax returns filed? Gifts made within three years of death are included in the estate, so the heirs can't claim it only has $1k. Its bank account may only have $1k, but the rest is sitting in their bank accounts.

Exactly, where did the proceeds from the sale of the stock go?

Where'd all the money go? Follow the money. Did the "kids" take the money before paying all the bills? If they won't pay the IRS, do you really think they'll pay you? Huge retainer or disengage!