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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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My siblings and I entered into a living will with my mother

Resolved Question:

My siblings and I entered into a living will with my mother for the past 8 years. We paid her taxes and utilities and upon her death Sept. 07. we have since sold the home. My questions is because it was a trust nominee do we still have to pay capital gaines?
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

The question is - when you became owners of the property?

If the property was inherited upon your mother's death in Sep 2007 and you became the owner at that time - inherited property would have stepped-up basis that is a fair market value of the property at the time the decedent died.

If you receive the property as a gift from your mother (while she was alive) eight years ago - the basis would be the same as your mother had at the time of gifting - thus if your mother purchased the property - the purchase price generally constitutes the basis.

 

As you sell the property - the selling price will be reported on the form 1099-S - http://www.irs.gov/pub/irs-pdf/f1099s.pdf - so the IRS expects you to report the sale transaction even if you do not have any taxable gain.

You will report it on the schedule D - http://www.irs.gov/pub/irs-pdf/f1040sd.pdf - part II

The taxable gain is calculated as (selling price) - (basis)

The basis should be adjusted by any improvement, selling, and some other expenses.

 

Please let me know if you need any clarification.

 

Customer: replied 8 years ago.
Could you tell me if a nominee trust set up by my mother eight years ago constitutes a gift ?I'm not sure what other benefit it would be for if not giving her children the home unpon her death.
Customer: replied 8 years ago.
Please explain how the capital gains works on my question as I'm not sure of what you wrote.
Expert:  Lev replied 8 years ago.

The capital gain is calculated the same way in any situation - as (selling price) - (basis)

The only difference is - how the basis should be determined.

 

If your mother set revocable trust - she still considered an owner of the property (the title was not changed - correct?). But upon her death the trust became irrevocable .

 

Putting the property into the trust in such situation is not a gift - as you did not became an owner - correct? - and your mother still had an option to dissolve the trust and take the property back.

If all above are correct - and you became the owner only after your mother died - the property is considered as inherited and the basis is a fair market value on the day she died.

 

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