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Tell your mother-in-law to not report the sale of her main home on a tax return unless she had a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).
If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income.
In short your mother-in-law can exclude the money she received for her home as long as she
As far as the IRA that was distributed, you do not mention the source of her income. If it is social security then she is not required to file but would wan to file if any withholding were shown against the IRA.
I sincerely XXXXX XXXXX information is helpful,
If her income is coming from the same sources as before and she was not required to file then her status is the same.
I mentioned in my prior message that if her $14000 comes from SSA then that amount will not make her need to file. If any taxes have been withheld then she should file to get them back as a refund.
Tell me the sources of her income and the exact amounts and I will use an estimator to advise.
Social security: $13,992
deceased husband's pension: $2,293
proceeds from sale of house: $41,000
IRA RMD disbursement(not sure the exact nature of the IRA): $1147
Interest from CD: $1400
Based on the information you have supplied she would have no tax liability and would not be required to file.
Again I stress, if any of the pension information shows withholding, then she would want to file to get that money refunded to her.
Just make sure she keeps all her information for 2009 ( all the 1099Rs and SSA form) in an envelope so if questioned later the facts would show this.