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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4124
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My father died in 2010. My mother is a ward of the state of

Customer Question

My father died in 2010. My mother is a ward of the state of Wisconsin and in a nursing home with late stage of Alzheimer's. Their home was sold in 2011 ("the estate of .....") per an attorney. The proceeds from that sale of the home were then forwarded to the state of WIsconsin. The "estate" was closed in 2011. I have just received a 1099C for the sale of the house. Do I have to file a return for my father's estate since neither he nor his surviving spouse received any money???
Submitted: 2 years ago.
Category: Tax
Expert:  Stephen G. replied 2 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 :

Was the home jointly owned by your mother & father? What does it say on the 1099-C?

Stephen E. Grizey :

Whose social security number is XXXXX the 1099?

Customer :

The home was in my father's name only. The 1099 is listed to "estate of J.M.D.

Stephen E. Grizey :

Interesting, but you still had to turn the proceeds over to the state of Wisconsin.

Stephen E. Grizey :

Was it transferred from joint ownership within 5 years from when your mother went into the nursing home?

Stephen E. Grizey :

Is your father's social security number on the 1099-C?

Customer :

Yes. Mom entered the nursing home in 2009. When she went into the nursing home, Dept. of Social Services had dad sign over the house to the state of Wisconsin so that he could live in the home for the rest of his life but at the time of his death, the house was to be sold and proceeds then would go to the state of Wisconsin. I can't say for sure if Dad's ss# XXXXX XXXXX the 1099C as I don't have it right in front of me, but I don't believe so.

Customer :

Mom's name was taken off the house when Dad signed over the house to the state of WIsconsin. DSS told him that was the way it had to be done.

Stephen E. Grizey :

If your father transferred the house to the state & retained a life estate in the house (which means he could live in it as long as he was alive) then he didn't own the house when it was sold, in fact he couldn't have since he wasn't alive.

Stephen E. Grizey :

His estate didn't own the house as it was transferred while he was alive.

Stephen E. Grizey :

Your mother didn't own the house, your father must have had her Power of Attorney or she would have had to sign the deed also (if the house was jointly held).

Stephen E. Grizey :

So I don't think the 1099-C is really correct, but in any event, I wouldn't worry about filing any tax returns for anyone or the estate, because nobody you are responsible for sold the house. If the IRS has a problem, they can go visit the State of Wisconsin.

Stephen E. Grizey :

It wouldn't matter anyway as since the debt was on their principal residence, there is an exception to having to pay any tax for debt forgiveness related to their principal residence.

Stephen E. Grizey :

I'm surprised that the state got the proceeds when there was an outstanding mortgage on the property.

Customer :

The title of the house was "legally" still in my father's name. At the time of his death, (and I literally mean within 48 hours of his death) DSS was calling me stating I had to put the house up for sale and sell it ASAP. As for my mom signing anything, since she is in the late stages of Alzheimer's, a physician had to sign a release stating that she was incapible of making her own decisions, and unable to sign for herself. She marked with an "x" and everything was witnessed. I am my mother's power of attorney. The house in question had no mortgage.

Stephen E. Grizey :

If the house had no mortgage, what is the 1099-C related to?

Stephen E. Grizey :

So your statement that the DSS had your father sign over the title of the house to the state of Wisconsin when your mother went into the nursing home wasn't accurate?

Stephen E. Grizey :

What you received was not a 1099-C - debt forgiveness, it was a 1099-S reporting the sale proceeds?

Stephen E. Grizey :

That's a giant difference.

Stephen E. Grizey :

So you are the one that signed the deed on behalf of the estate?

Stephen E. Grizey :

Please remember to "ACCEPT". Feedback, if you have time & bonuses where you think they are warranted are always most appreciated. I'll be happy to answer any follow-up questions you may have.

Customer :

Sorry I had to leave. I wanted to get the paperwork in front of me so I knew exactly what I had. It is indeed a 1099-S. I apologize. This is all new to me. It is listed to the estate of j.m.d. and yes I did have to sign off on the deed at the time of the sale.

Customer :

When Mom went into the nursing home Dad signed paperwork which stated that he could live in the house as long as he was alive, but in the event that he sold the house, or at the time of his death, the proceeds from the sale of the house went to the state of Wisconsin. Neither myself or anyone else (my mother) received any financial gain. The money received for the house was deposited into the estate of J.M.D account and a check was then forwarded to the state. I am now worried that somehow there are now some kind of taxes due on this, and there is no money in the account to pay for this.

Expert:  Stephen G. replied 2 years ago.
OK, now we have a different set of facts; now let me say up front that is unlikely that any tax is owed.

Here's how I analyze the situation based upon your revised facts;

At the time of your father's death, the title to the house remained in his name. He owned 100% of the home, but he retained the right to live in the home until his death. Based upon that, the house would have been included in his estate at the fair market value at his date of death. Based upon that, the tax basis of the house, in the hands of the estate is the fair market value at the date of death.

You'll need to tell me what the value was at the time of your father's death and what the house sold for -- ie. the number on the 1099-S.

Chances are you actually have a loss on the sale of the house; when an estate holds title to real estate acquired from a decedent, the real estate is consider an asset held for investment;

So, you should be filing a tax return for the estate for 2011 to report the sale indicated on the 1099-S. There should be no tax due. There is most likely a loss, if nothing else due to the selling expenses related to the sale.

You didn't say what ID number was indicated on the 1099-S.

Unfortunately, what this amounts to is a lot of paperwork, without much of a benefit to anyone.

A couple of additional questions, did your father have a will and were there other assets in his estate? Was there a 1041 filed for the estate for 2010? Was a final personal return for 2010 filed for your father?
Customer: replied 2 years ago.
the fair market value of the house at the time of sale per 2010 property tax bill was $109,200. The house sold for $60,000 which included $almost $8,000 for a new septic system. The federal ID Number is XXXXX and the transferor;s ID number is XXXXX my father did have a will, but no other real assets. No there was not a 1041 filed for the estate in 2010, and no there was not a final personal return filed for Dad in 2010. What do I have to do???????
Expert:  Stephen G. replied 2 years ago.
Since the house was "signed over" to the state & since there was no gain on the sale in any event and since your father was not alive at the time of the sale; there is nothing for you to do. I don't believe that you will ever hear from anyone relating to the sale of the property and if you do, there would be no tax due & a simple explanation would cover the situation.

Please remember to "ACCEPT". Feedback, if you have time, & bonuses, where you feel they are warranted, are always most appreciated.

Expert:  Stephen G. replied 2 years ago.

Is there anything else I can clarify for you or can I answer any additional questions for you? If not, remember that in order for me to receive credit for my answers, you must click on the green "ACCEPT" button even though you have made a deposit. Also, if you are not satisfied with my answers, you can obtain a refund by contacting customer service or letting me know & I will contact them for you.

I hope that I have fully responded to your question, or if I haven't, you will give me the opportunity to do so. Thanks very much, Steve Grizey

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Stephen G.
Stephen G.
Tax Professional
4124 Satisfied Customers
Extensive Experience with Tax, Financial & Estate Issues