MyVirtualCPA : Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
MyVirtualCPA : This will be taxed as capital gains.
MyVirtualCPA : Your basis will be the value of the house at the date of the death of your husband
MyVirtualCPA : I mean father
MyVirtualCPA : You were not taxed when you actually received the house, which was your inheritance
Customer: Each of the brothers will be taxed on the value of the house in 2002?
MyVirtualCPA : Okay say the house was worth $100,000 in 2002 and you have sold it for $150,000
MyVirtualCPA : each of you would be taxed on your share of $50,000
Customer: I believe we are selling it for considerably less than it was worth in 2002
MyVirtualCPA : You will have a long term capital loss, which you can deduct $3,000 a year against other income
MyVirtualCPA : or you can deduct the entire amount against capital gains
Customer: When I declare this amount to my accountant, what documentation will I need from my brother, the executor?
MyVirtualCPA : You should get a 1099-S from the title company that closes the sale transaction
MyVirtualCPA : And your brother should tell you the value of the house in 2002
Customer: Ah, so the 1099 will be determine where the source of income came from?
MyVirtualCPA : Yes
Customer: I will simply be receiving a check from my share from the seller, so I was wondering how to prove where the income came from
MyVirtualCPA : You should get the 1099-S
Customer: So I will be taxed on this income different than if it was strictly capital gains?
MyVirtualCPA : No, it is strictly capital gain
MyVirtualCPA : But if you sell at a loss, it's a capital loss
MyVirtualCPA : and you won't owe tax on your portion of the proceeds
MyVirtualCPA : You will be able to deduct the loss
Customer: Oh...I thought the tax on an inheritance was less
MyVirtualCPA : When you actually got the house, that was your inheritance
MyVirtualCPA : you pay no tax on the value of the house
MyVirtualCPA : when you sell the house, that's another transaction
MyVirtualCPA : When you inherited the house, you received an asset, but did not have to pay tax on the receipt of that asset
Customer: Got it....I think. I'm sure my accountant will understand if I provide her with the right info.She also mentioned the gain/loss issue.
MyVirtualCPA : Yes she would be able to do this
MyVirtualCPA : it's very simple
Customer: She had suggested I talk to a lawyer, hence my discussion here. I don't think I need to here an attorney. The amount is not worth it I believe
MyVirtualCPA : No, there's no need to speak with an attorney
Customer: Thank you. You have helped clarify.
MyVirtualCPA : You're welcome
MyVirtualCPA : Please let me know if you need anything additional
Customer: I will try and print this out so I can relate to my wife....the smart one
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