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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4187
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am a 62 y/o single woman working in a nonprofit as a nurse

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I am a 62 y/o single woman working in a nonprofit as a nurse manager normally earning $78,000 with an Adjusted Gross Income generally around $ 57,780.00 and a Federal | Taxable Income usually in the $ 40,983.00 range. I have a rental house that generates about $7200 annually.

My mother died in July, 2008 and left 80 acres of land divided between my brother and myself in an irrevocable trust (of 8 years). The home is on my brother’s 20 acres and my land had pecan orchards. There were some creditors that had claims on her estate which was finally settled a year and some months ago. I sold the property on 12/23/2010 for $200,000 with informal advice from attorney friends that it was not taxable income due to inheritance. However, when I completed the turbo tax return – the message was clear that it is all taxable income, none of my usual deductions count because they are no longer within the 2% range of my income. Additionally, I now owe a penalty for the $6,000 I put in my Roth IRA. I’ve been told I can back the funds out of my Roth and pay a one time penalty and lose any gains for this year. However, I owe over $45,000 in state and federal taxes. I used the money to pay off my mortgage, gave some to my mom’s friends and placed $100,000 in a CD. I was counting on this to apply toward retirement in 3 years and I’m struck with having to borrow money to pay these taxes. This seems so unfair. Please tell me there’s something I can do to give the government less money. This seems so unjust! The property was in AL and I live in Atlanta, GA.

Nancy Boothe XXX-XXX-XXXX XXX@XXXXXX.XXX
Submitted: 3 years ago.
Category: Tax
Expert:  Stephen G. replied 3 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

The key lies in the terms of the trust.

Stephen E. Grizey :

What was going on with the trust before your mother died?

Stephen E. Grizey :

Who were/are the trustees

Stephen E. Grizey :

Did the trust become irrevocable when she died ?

Stephen E. Grizey :

When you say there were claims against her "estate", what estate? What was in her estate? Was there a probate estate?

Stephen E. Grizey :

Was there an estate tax return necessary?

Stephen E. Grizey :

We really need to be on here at the same time in order to resolve this; if we aren't on together tonight, can you leave me a time when you can be on again & I'll try & meet your schedule if I can.

JACUSTOMER-hos8s9a5- :

It was an irrevocable trust set up putting the property in my brother & my names in order to avid probate. Her caretaker had charged about $75,000 on my mom's credit cards - a few of the bills I paid & other's filed claim on her estate. The judge ruled there was no estate remaining - however, the creditors did not show up in court (Baldwin County, Alabama). My brother was the Power of Attorney person designated to oversee(?)the estate. My understanding was that the estate (property) was transferred automatically at the time of her death but the "estate" was not formally closed by the judge until a year and a half ago, I believe. I also don't know if the property was actually considered part of "the estate". Since I sold the property as soon as I felt it appropriate "after the gulf oil spill" and decision by the judge - I still thought of ity as excempt from an inheritance tax - but hadn't even considered capital gains. Thanks, Nancy

JACUSTOMER-hos8s9a5- :

I will be available tomorrow & will respond to an email or text(NNN) NNN-NNNNatt wireless

Stephen E. Grizey :

OK, I will try to engage you in the morning; we aren't allowed to contact you outside of JustAnswer. Usually phone numbers & email addresses are blanked out;

JACUSTOMER-hos8s9a5- :

got t - but I'm here now if you're still on. n

Stephen E. Grizey :

I was, but saw you were offline, so I didn't hang around, I've been answering someone else's questions; It's !AM now & I've had enough for tonight..................

Stephen E. Grizey :

Let me know when you're back on line by typing something here, & I'll get a message & I'll come back as soon as I can (i may be working with someone else)

Stephen E. Grizey :

It is 9:54 AM now

JACUSTOMER-hos8s9a5- :

I'm here when u are. Nancy B

Stephen E. Grizey :

Me too

Stephen E. Grizey :

Let me reread where we are

Stephen E. Grizey :

Are you there?

JACUSTOMER-hos8s9a5- :

yes

Stephen E. Grizey :

ok, now what you're telling me about the trust situation is confusing; so let's start from the beginning

Stephen E. Grizey :

Where was you're mother living when she set up the trust?

Stephen E. Grizey :

you're = your

JACUSTOMER-hos8s9a5- :

on the farm (property) in the trust.

Stephen E. Grizey :

who were the trustees

JACUSTOMER-hos8s9a5- :

I was tyhere also - caretaking her for the last few months. Therte were no trustees - just asn executor of her will.

Stephen E. Grizey :

No. If she had a trust, any kind of trust, there had to be trustees

Stephen E. Grizey :

Even if it was just her

JACUSTOMER-hos8s9a5- :

I need to go home & search for the documents - will you be on later today?

JACUSTOMER-hos8s9a5- :

will you tell me the documents yoiu need?

Stephen E. Grizey :

Sure. But tell me. Why do you think that there was an irrevocable trust? Are you sure that the trust wasn't part of her will?

JACUSTOMER-hos8s9a5- :

I don't know.

Stephen E. Grizey :

You need the trust, if there is one; A copy of the will; a deed if there is one to you & the closing documents on the sale

JACUSTOMER-hos8s9a5- :

It was set up by an attorney who died before she did.

Stephen E. Grizey :

That doesn't matter as long as we can sort out what actually happened

Stephen E. Grizey :

What does your brother say about all this?

JACUSTOMER-hos8s9a5- :

Thanks. I'll look for the documents and be back. Should I try to scan it in? n

Stephen E. Grizey :

No that won't work, nor is it necessary; once you have the documents, I know what to look for

JACUSTOMER-hos8s9a5- :

He's less savy than me - which is rough - but its not contentious.

Stephen E. Grizey :

Any idea what time you'll be back on?

Stephen E. Grizey :

don't worry, I do this all the time; it is confusing sometimes even to us; so it's no wonder you don't understand it all;

Stephen E. Grizey :

What state are you in?

Stephen E. Grizey :

oh i see Georgia

JACUSTOMER-hos8s9a5- :

Georgia. Thanks. I'll be back & just stay on until you have time? n

JACUSTOMER-hos8s9a5- :

the property is on the Gulf coast - Fairhope, AL

Stephen E. Grizey :

if you come back to this question, and make a note, i will get an instant message that your're here

JACUSTOMER-hos8s9a5- :

got it. Thanks. Nancy

Stephen E. Grizey :

ok Nancy, I'm Steve; will help when you come back :]

Stephen E. Grizey :

y'all come back now, hear?

JACUSTOMER-hos8s9a5- :

I'm back! Sorry it’s taken so long. I found my mother's will which originated in 1993 and was finally probated on Nov 20, 2009. The Court date was November 16, 2009.

JACUSTOMER-hos8s9a5- :

I called my brother's attorney. The attorney didn't understand the trust either but said the date her will was probated and the property was in the will. I sold the property to her neighbor on 12-21-2010. The amount recieved was around 199,300.

JACUSTOMER-hos8s9a5- :

Her death was 2/09/2008

Stephen E. Grizey :

If the property passed to you via the will, then it wasn't in the trust; possibly she had a trust that wasn't funded,

Stephen E. Grizey :

Anyway, your income tax basis would be the fair market value at your mother's date of death.

JACUSTOMER-hos8s9a5- :

What does that mean? "income tax basis"

Stephen E. Grizey :

It means your cost for income tax purposes in computing gain or loss.

Stephen E. Grizey :

Was the property subdivided?

JACUSTOMER-hos8s9a5- :

Are you saying I have to claim that amount as income for 2010 on my taxes and there's nothing else I can do?

Stephen E. Grizey :

I'm say that you probably have no gain or loss or very little.

JACUSTOMER-hos8s9a5- :

How do I reflect that in filing?

Stephen E. Grizey :

You have to figure out what the fair market value of just what you sold was at your mother's date of death.

JACUSTOMER-hos8s9a5- :

Turb tax says since more than 2 yrs had passed since her death - it could no longer be counted as an inheritance - or perhaps I misunderstood?

Stephen E. Grizey :

You need to start by answering my questions. Was the property subdivided at the time your mother died or did you subdivide it later so you could sell it.

Stephen E. Grizey :

Forget what you think turbo tax says............that's not what it means

JACUSTOMER-hos8s9a5- :

It was already divided into 2 parts - but I'm not certain about that. It was still listed in her name.

Stephen E. Grizey :

Good!

Stephen E. Grizey :

So how did you split it with your brother, ie determine who got what?

JACUSTOMER-hos8s9a5- :

It was listed in her will - and she told us.

Stephen E. Grizey :

So, in the will, she left you one parcel & your brother the other, right?

JACUSTOMER-hos8s9a5- :

Let me read again quickly

Stephen E. Grizey :

ok take your time

Stephen E. Grizey :

Also, while you're typing, tell me how you came up with the selling price & did you pay a sales commission?

JACUSTOMER-hos8s9a5- :

Although I recall seeing the specific property description somewhere - the will simply leaves 40 acres to be divided between my brother and myself. Her wishes, however, were clear.

JACUSTOMER-hos8s9a5- :

sorry. They were my neighbors and called, asked if they could buy it. I said 200,000 & they said yes. No realtor involved.

Stephen E. Grizey :

And you're sure the title to the property was still in her NAME AlONE when she died?

JACUSTOMER-hos8s9a5- :

What can I do to be certain?

Stephen E. Grizey :

Do you have a copy of the deed you gave the buyers?

JACUSTOMER-hos8s9a5- :

For some reason, I do believe our names were added to the property but the documentation wasn't completed. I'm listed as the "grantor" with the property sale. n

Stephen E. Grizey :

that's ok, do you have the deed. that's my question

JACUSTOMER-hos8s9a5- :

I have a certified copy of the warrenty deed at closing.

JACUSTOMER-hos8s9a5- :

I mean to say that I don't have the original.

Stephen E. Grizey :

doesn't matter, so you have a copy in front of you now?

JACUSTOMER-hos8s9a5- :

yes

Stephen E. Grizey :

ok good

Stephen E. Grizey :

look for the section which should be right near the beginning that starts .................."for my title.................."

Stephen E. Grizey :

when you find it, tell me what is says as far as where your title came from, ie who or what; in may have 1 or 2 links ie see deed of....................xyz to........zxy............from etc.

JACUSTOMER-hos8s9a5- :

There's nothinglike that. It says "Nancy Norene Boothe"..the Grantor, for in consideration of $10 and other considerations...do hereby ...grant, bargan, sell and convey to Matthew Combs... then it decribes the property and documention (description) of the two easements

JACUSTOMER-hos8s9a5- :

it also says [on the title search document]

JACUSTOMER-hos8s9a5- :

the taxes are accessed to lb boothe (life estate) pin # XXXXX with an assessed value of $900 with no homestead or improvements ...taxes paid of $21 for 1010 - the property had been considered wetlands?

Stephen E. Grizey :

the title reference should be right after what you wrote, or there should be another deed into you from you & your brother

Stephen E. Grizey :

Oh so your mother had a life estate in the property?

Stephen E. Grizey :

That makes a giant difference (good difference);

Stephen E. Grizey :

This is the danger of trying to get into too much online................

JACUSTOMER-hos8s9a5- :

good news?

Stephen E. Grizey :

She must have conveyed the property to either you & your brother or the irrevocable trust (if there even is one) before she died, reserving a life estate in the property.................

Stephen E. Grizey :

you know what a life estate is right?

JACUSTOMER-hos8s9a5- :

no

Stephen E. Grizey :

what did the attorney you spoke with say, exactly if you remember

JACUSTOMER-hos8s9a5- :

I don't recall. He was the one that said I shouldn't have to pay taxes on it - but wasn't qualified to make that actual legal advice....

Stephen E. Grizey :

a life estate means your mother reserved the right to live and or use the property as she wished until her death, so whoever she granted to property to, as I just noted above couldn't do anything with it until she died

JACUSTOMER-hos8s9a5- :

In this last conversation - what I relayed in the earlier is pretty close to a quote.

Stephen E. Grizey :

Moreover, for estate tax purposes, if she had a taxable estate, the property would have been included in her estate just as if she never transferred it to anyone...................

JACUSTOMER-hos8s9a5- :

got it - so the probate settlement date is when it was conveyed to me?

Stephen E. Grizey :

No. For real estate it would be her date of death.

Stephen E. Grizey :

I would use your selling price as the cost also, and you would add to that any closing costs you had, deed stamps, attorney's fees etc., and then the selling price is the gross price in the deed & you should have a loss; it will be a long-term loss.

Stephen E. Grizey :

Too bad I didn't know about the life estate in the beginning..............oh well, alls well that ends well..............the point is no tax!

JACUSTOMER-hos8s9a5- :

The closing documents are done and (perhaps) the 1099 has been sent to the government. How can I change that?

Stephen E. Grizey :

I still would be curious to know what the deed you gave the buyer says about how you acquired title.............

Stephen E. Grizey :

What do you want to change?

JACUSTOMER-hos8s9a5- :

is "fee simple" a means of obtaining title?

Stephen E. Grizey :

the 1099-B reports "gross proceeds", not the gain or loss; what's on the 1099-B?

Stephen E. Grizey :

yes but what does it say ; what else?

JACUSTOMER-hos8s9a5- :

I dont have it yet - I don't think it's been sent

Stephen E. Grizey :

It should have the gross selling price, but that isn't what you pay taxes on; right, you get that, right?

JACUSTOMER-hos8s9a5- :

no - I didn't get that. It has "gross proceeds: $200,000"

JACUSTOMER-hos8s9a5- :

maybe that's the word i missed in turbo tax?

Stephen E. Grizey :

what has that on it, I thought you said you didn't receive it yet?

Stephen E. Grizey :

What do you mean Turbo Tax? You entered it in Turbo Tax & it came out as taxable?

JACUSTOMER-hos8s9a5- :

When I was looking for the documents - I found a letter from them requesting my taxpayor ID - this was part of the letter. n

Stephen E. Grizey :

If so, that's because you probably didn't enter any "cost" figure.

Stephen E. Grizey :

They said the gross proceeds would be 200,000?

JACUSTOMER-hos8s9a5- :

I had not replyed yet. I gave them my ss# XXXXX when I called.

Stephen E. Grizey :

That might be all you get; a substitute 1099-B............

Stephen E. Grizey :

Oh boy.........no wonder

JACUSTOMER-hos8s9a5- :

How do I correct to include cost or do I do that in my filing? n

JACUSTOMER-hos8s9a5- :

Can I ask them to file a revised 10099-B

Stephen E. Grizey :

You need to adopt your own CPA................it is a good think I have a soft spot for that Southern accent

Stephen E. Grizey :

What do you want them to revise? It sounds right to me.

Stephen E. Grizey :

Gross proceeds is all they report.

Stephen E. Grizey :

the land sale you made is like a stock sale ; you bought it for 10. sold it for 25. you pay tax on 15, not 25.

JACUSTOMER-hos8s9a5- :

You're right about that! I'm grateful for all the time you've taken with this ...so sorry ...you have the makin's of a southern gentleman. So - I need to do the rest of this in my filing?

Stephen E. Grizey :

In your case, due to the rules your "cost" becomes the fair market value at your mother's date of death + closing costs.

Stephen E. Grizey :

Oh I see what you mean, did Turbo Tax show up with that big profit?

JACUSTOMER-hos8s9a5- :

Yes - but I suppose TT is limited to my input! Now I've got it - and there's a place for that on the tax form? I just need to find it? A sense of calm is overtaking me!

Stephen E. Grizey :

you don't need to be sorry, this is what I use to do for a living.......before most of my brain cells died

Stephen E. Grizey :

I'm available for adoption :]

Stephen E. Grizey :

FINALLY I LIKE TO BE THE ONE WHO CALMS WOMEN DOWN

JACUSTOMER-hos8s9a5- :

I'm so glad you jumped to doing this - as soon as I figure out where I made my mistake in turbo tax - I'm back in business. You may have been the best news this year! Thanks

Stephen E. Grizey :

so around where it says "fee simple" doesn't say somewhere on that deed who or what owned the property before you?

JACUSTOMER-hos8s9a5- :

and ---the adoption sounds possible! n

Stephen E. Grizey :

Please remember to "Accept", it is the only way we get credit for our work. Feedback, if you have time, and bonuses, where you think they are warranted, are always most appreciated.

JACUSTOMER-hos8s9a5- :

no - I couldn't even find the "fee simple" language again.

Stephen E. Grizey :

Come back if you have trouble with Turbo Tax, I have it on my computer

Stephen E. Grizey :

By the way, I'm 63 & I once was married to a Southern girl & i went to the University of Miami where we stood up when the band played Dixie

JACUSTOMER-hos8s9a5- :

will give raving feedback, bonus and be back if I have problems with Turbo Tax! Thanks BIG! BTW - me, too. (on the Dixie ovation...my my!

Stephen E. Grizey :

OK good working with you, I'll prepare the adoption papers

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4187
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen G.
Stephen G.
Sr Financial & Tax Consultant
3651 Satisfied Customers
Extensive Experience with Tax, Financial & Estate Issues