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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1237
Experience:  US Taxation specialist.
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In 2004 I paid real estate taxes and nursing home bills for

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In 2004 I paid real estate taxes and nursing home bills for my late mother-in-law out of my own pocket. I did not expect to ever see the money again, but after my stepchildren finally started the succession process this year I received partial repayment. Does this count as income for my 2011 income taxes?

When you state your "late" mother-in-law do you mean that she has now passed away?

 

If yes, and you have received the funds as part of her will (i.e. an inheritance) then there is nothing you need to do. Income from inheritance is tax free and need not be reported.

 

Let me know if this is not from inheritance, and I can advise on the treatment for tax purposes.

 

Hopefully this provides the clarity you were looking for, let me know if you have any further questions.

USTaxAdvising and 2 other Tax Specialists are ready to help you
Customer: replied 5 years ago.

In answer to your question about inheritance, no it was not from her will. My late husband was Stella's only child. He predeceased her by 2 months in June of 2003. Rights of Inheritance then passed to Hank's surviving son and daughter and to his oldest son's children. Stella had suffered from dementia and Hank and I were co-Curators. Hank and I served as Curators for Stella without compensation. Because Louisiana follows French common law Hank inherited 1/2 of the property, but was not allowed to use any of the funds nor income from the rental of the home as long as his mother lived.

 

After his death I became the sole Curator. Stella's funds ran out shortly before Hank died and I had started the process of applying for Medicaid to pay her nursing home bills. She died before the process could be completed. There were several thousand dollars worth of nursing home bills and a little over a thousand dollars in real estate taxes due. I paid those bills out of my own pocket, after selling some of the real estate that I had inherited from Hank.

 

After her death, I no longer had any rights in handling her property. I contacted the children to start the Succession process, but basically, they did nothing. The attorney who had done the original work when Hank's dad died and when we had to establish Curatorship for Stella closed his practice. This all occurred in Louisiana while I was living in California and then moved to Washington State in 2006. I was finally able to find another lawyer who was willing to contact the children and try to finish the Succession. In the process of providing information the attorney needed I came across my canceled checks for the nursing home bills and real estate taxes. I sent these to the attorney and received partial payment in May. I am still owed over $2000, which I will receive from in payments from the rental of Stella's home next year.

 

The payments are a return of the money I spent to cover her debts and to prevent the property from being taken for taxes. I am not receiving interest, nor was I ever compensated for the effort I put out in taking care of her affairs for seven years.

It sounds to me like you have simply "loaned" Stella funds for debts, real estate taxes, and nursing home bills. I believe the funds would not be reportable on your annual income tax returns. It is simply a return of funds of which you "loaned" Stella. This below market loan but it is not required to carry an interest charge as the principal amount is less than $10,000.

See a good article here on below market loans: http://www.fool.com/taxes/2002/taxes020816.htm

 

You can not deduct the real estate taxes as you did not own the home.

 

The funds that you paid on behalf of Stella may be considered a gift. Was the amount in excess of $12,000? (Annually)

 

It does not appear that this income would be taxable and thus not reportable. If you received an economic benefit for paying these debts and expenses then you would have some sort of taxable income to report but based on the facts it does not appear that you received any benefit.

 

 

 

USTaxAdvising and 2 other Tax Specialists are ready to help you

No worries about the tip Customer.

 

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