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Do I need to claim the excess proceeds from the tax sale of…

Hi! Do I need...

Hi! Do I need to claim the excess proceeds from the tax sale of an inherited property as income on my taxes?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

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Accountant's Assistant: Is there anything else important you think the Accountant should know?

Not that I know of. I'm the executor of their estates and sole heir.

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Answered in 5 minutes by:
3/12/2018
TaxRobin
TaxRobin, Senior Advisor
Category: Finance
Satisfied Customers: 17,624
Experience: 15 years of experience in financial advising with emphasis on tax issues.
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Customer reply replied 1 month ago
Thanks

Yes you do. When you inherit property and then sale you must report the sale. This is true even if you do not receive more than the basis of the property.

Your basis (or cost) for the inherited property is the Fair Market Value on the date the person passed away. You may even have a loss which is used by you to reduce other gains or income.

You are required to report.

Please let me know if you need more information.
If not then please scroll up to see the STARS to rate so I am credited.

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Customer reply replied 1 month ago
It was more than one property and the tax master sold it not I, does any of that matter?

The tax master? I am not familiar with that term.

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Customer reply replied 1 month ago
They were sold at auction by the county to pay delinquent property taxes.
Customer reply replied 1 month ago
If I must claim it does it fall under inheritance, rental property sale or other investment income?

Oh I see. If they were changed over to your name as inherited then yes you still report of sold. Generally they only go for the tax owed amount.

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Customer reply replied 1 month ago
They were not in my name but I received the funds as heir.

So you just received money? Not really inherited the property

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Customer reply replied 1 month ago
The auction brought in more than the taxes owed

If the property was not actually owned by you no you do not have to report.

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Customer reply replied 1 month ago
ma'am

Receiving cash from the estate would not be taxable.

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Do you know who is handling the final return or estate return for the deceased?

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Customer reply replied 1 month ago
I handled it in 2014 when she passed.

If the sale was in her estate then you may need to report there if the amount was over $600.

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The 1041 form would need to be used to report the amount paid to the estate even though she passed in 2014.

You may want to get a local tax professional to assist you in completing that.

I hope this has been useful.

Please let me know if you need more information.
If not then please scroll up to see the STARS to rate so I am credited.

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Customer reply replied 1 month ago
The properties were originally deeded to her husband who passed in 2009, He and she were listed as plaintiffs and I in (rem only). I claimed the funds as heir to both their estates.

Ok but if this was paid to her estate by virtue of her inheriting from husband all and you not inheriting the actual properties, then her estate must file to report.

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Customer reply replied 1 month ago
Would it need to be claimed on both their estates since they were both listed as plaintiffs?
Customer reply replied 1 month ago
do I need to claim the total amount the properties were sold for or just the after taxes were paid portion?

No her estate. You will need to show the income the estate received for the sale.

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Customer reply replied 1 month ago
I know my probate attorney filed documents to deed the properties to me at the time while started probate. Would that make them mine even though I had not personally changed their deeds?

Your attorney needs to tell you if you were the owner by whatever he or she filed.

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Customer reply replied 1 month ago
I sold a property the traditional way recently and the title company informed me that the property was deeded to me through heirship and it was sold not through the estate but through me as a result. Would that also hold true in this situation even though I didn't change the deed in either circumstance?
Customer reply replied 1 month ago
do I list them as rental income or investment property or something else? They were dilapidated and uninhabitable at the time of auction.

Yes it could. You had specific advise in the sale that the property was deeded to you and you were the owner.

If you did not actually use them for rental they are not rental. They are just property shown on form 8949 with the fair market value on the date of the deceased passing as cost.

In closing, I have told you the tax consequences and reporting for each scenario but I cannot tell you if you were the owner or not. That is not tax law but real estate law.

TaxRobin
TaxRobin, Senior Advisor
Category: Finance
Satisfied Customers: 17,624
Experience: 15 years of experience in financial advising with emphasis on tax issues.
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TaxRobin and 87 other Finance Specialists are ready to help you
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Customer reply replied 1 month ago
Ok thanks.

You are most welcome

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