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client asks - I sold my house but my children own it


WITAXLADY
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so I know I need more info - Is it a LE?

did she gift it or they purchase it?

If they do own it and it is sold - the children will have to pay capital gains on either the purchase price or the gifted basis - correct?

Same if LE? or can she use her primary exclusion?

I sure have some doozy questions!

Thank you,

Darlene

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On 6/8/2022 at 10:07 PM, WITAXLADY said:

so I know I need more info - Is it a LE?

did she gift it or they purchase it?

If they do own it and it is sold - the children will have to pay capital gains on either the purchase price or the gifted basis - correct?

Same if LE? or can she use her primary exclusion?

I sure have some doozy questions!

Thank you,

Darlene

De......I have one exactly like this but don't have to deal with it until next year.  Children have already received 1099 for their share of the sale price.  This was a LE.  NOT a gift.  These are great when they work; not so much when owner outlives the LE.  Mom will get stepped up basis for her share.  Each child will have to build basis from time the house was purchased.  My client is one of the children.  I told him he has a year to look for and remember all of the additions and improvements that his parents made over the years.  My client "gets" it and he is doing his homework.  He will have a CG, but may be fine.  I told him to save the money he got until we know how much tax he is going to own.  Since he is retired, I don't expect it to be all that bad.  Mom is going to live with daughter and daughter has cooked up a scheme to give money back to Mom and then charge her for taking care of her.  NOT!!!!!  Daughter is not my problem, but I told Brother, who is, that she cannot get out from under the 1099S that she already has.  These are such fun. Good luck and happy to still be in touch with you..

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Thx Marilyn!

Good to see you Hanging in there yet!!

D

Want some - I have a few more!!

 

One just got his 2017 refund for $7,700 - we persevered!!

another asked for an extension as he was moving in same town so did not file sales tax since Dec!!

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11 hours ago, mcb39 said:

not so much when owner outlives the LE.  Mom will get stepped up basis for her share.  

This is not clear to me.

Sounds like there might have been a completed gift if children were on the deed and received proceeds from the sale.

Mom received step up basis but is still alive?   Do you mean from husband's share?

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Yes, because it was her home.  If it is in a Life Estate, childrens' basis is actual original cost of the home.  This is the downside of outliving a Life Estate.  Mom gets her primary home exclusion, but children do not get gift exclusion in a Life Estate situation.  They do not technically own the home until the parent (s) pass.  Remember that this is not an inheritance with stepped up basis for the children.  

Edited by mcb39
added a sentence.
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On 6/15/2022 at 4:57 PM, WITAXLADY said:

Thx Marilyn!

Good to see you Hanging in there yet!!

D

Want some - I have a few more!!

 

One just got his 2017 refund for $7,700 - we persevered!!

another asked for an extension as he was moving in same town so did not file sales tax since Dec!!

DUH!!!!!  Thanks for the offer, but I have plenty of my own.  They just keep getting better and more complicated.  I had a client come in last week who just now got his Partnership K1.  How does that work?  Then he tells me that he sold a piece of property in January with quite a profit.  Have to figure out basis because land was originally part of a subdivision that belonged to the Partnership with the delinquent K1.

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5 hours ago, mcb39 said:

Yes, because it was her home.  If it is in a Life Estate, childrens' basis is actual original cost of the home.

So it sounds like dad passed away and mom received a stepped up basis (100% if community property state).

Then she created life estate and house was sold while she was still alive.

So children, including your client, received part of proceeds based on their interest, which should have been allocated per life expectancy tables.

Since it was a completed gift, children receive a share of mom's basis.

Mom's basis should be prorated in the same manner as the proceeds.

So children receive a portion of stepped up basis from death of first parent in this case.

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