Selling Mom's home

[JanMi]

My possibly new clients have a situation where Mom is in the hospital and her only income is from Social Security which the hospital takes to help pay her expenses. In 1985 Mom deeded her house and property to her 3 daughters and included herself in the deed as having life lease.

Not being able to keep up the expenses of Mom's home the 3 daughters sold the house and property in 2011, for $52,500.00. With realtor and misc expenses taken out they received $47,000.00. A 1099 was given to them at the time of closing with each sisters name and Social Security number on it. In 1985 the value of the house and property was $40,000.00.

DHS found out that Mom's house was sold and they calculated her portion of the selling price was around $14,000.00 and they then took away her medicare for 2 months. The hospital also told the 3 daughters they would have to pay $265.00 a day for her hospital stay until her medicare starts back up. The daughters paid the hospital a total of $18,000.00.

My question is because DHS calculated the Mother's part of the home was worth $14,000.00 and the daughters paid out $18,000.00 can any of the money paid out be deducted by the 3 daughters on their tax returns?

I have never had this kind of question ask of me and I could use some help. Thank you.

Another question: Technically the $18,000.00 the 3 daughters paid to the hospital was Mom's $14,000.00 share in the sell of her home and the rest was for her hospital room until medicare could be given back to her. So can the daughters deduct Mom's share between them when they file their taxes to go against the sale cost, being they didn't get the money for themselves? They will be filing this tax season. Thank you

[mcb39]

I guess my first question would be whether the daughters reported CG on their portions of the proceeds when the house was sold. I don't believe their basis was the 1985 basis as this was gifted property. Their basis would be whatever their mother's basis was when she (the mother) acquired it. Someone else can chime in here and correct me if I am wrong.

As far as the medical costs are concerned, I doubt that the daughters can deduct them unless the Mother was one of their dependents, which does not seem to be the case. These LE issues can get pretty complicated.