Client's parents passed away last year

[Kea]

Both parents were in a nursing home since late 2007 and passed away in 2008, a couple of months apart. The only assets they had were a house and a car. Client was paying nursing home bills until Medicaid took over. Shortly after the 2nd parent passed away the client sold the house and Medicaid demanded (and got) reimbursement for their costs.

I will be meeting with the client tomorrow to get exact dates and $ amounts of all transactions. It is my understanding that if the client paid more than 1/2 the support of the parents that he can claim the medical expenses he incurred. Per Quickbooks, it would not matter if the parents' income was over the threshold. The parents only income was from Social Security and whatever Medicaid paid.

I am not sure what to do about the amount repaid to Medicaid. The parents had not filed a return for a number of years because their income was too low. Does the cost belong to the parents and go on an estate tax return (if even needed)? Or does the reimbursement go to the client as Sch A Medical? Would the Medicaid reimbursement affect the basis and / or sales price of the house?

Thanks so much.

[jainen]

>>and whatever Medicaid paid<<

Medicaid paid more than half the support while they were in a nursing home. The repayment did not come from your client, but from a lien against the property. Your client can't claim the couple as dependents or deduct their medical bills. Since there is no final return or estate return, there is nothing further to be done in terms of tax benefits. Your client's parents were fortunate to get help.

[RoyDaleOne]

Naturally, if Medicaid got reimbursed, then the amount of support provided by Medicaid is reduced by the reimbursement.

Jainen is just in a mood.

I am not sure how the computations will work out since the house was apparently owned by the parents.

[Kea]

The house was owned by the parents. Their assets were not over $2 million so there will be no 706. Not sure yet about the 1041. I'm also not sure (in this case) how to report the house sale. I'm not sure how / if the Medicaid reimbursement affects the basis or selling price.

As far as determining who paid over half the support, I will have to wait until I get the figures from the client today. I will depend on (among other factors) how much the client paid, how much Medicaid paid - after reimbursement.