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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29646
Experience:  Taxes, Immigration, Labor Relations
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In December of 2005, my husband and his 5 siblings had their

Resolved Question:

In December of 2005, my husband and his 5 siblings had their names added to the deed of their father's house. There was a life estate established so he could remain living there. He was moved into a nursing home in May of 2009. The house sold in November of 2009. Each sibling received $11,825.26, and his Dad received $33792.55.

How should the siblings report this income? I'm using TurboTax to file, and I don't see an appropriate category since none of the siblings paid anything for the house, they were added onto the deed.

Please help! Thanks, Jill
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.

Hi Jill,

 

"their names added to the deed of their father's house" - means - they receive the property as a gift.

The basis for the gifted property is the same as the donor (in your situation - the father) had at the time of gifting - that is mainly the donor's purchase price adjusted by any improvement and some other expenses.

 

Each sibling will report his/her share of the proceeds and basis and should calculate the capital gain on the schedule D.

Because they owned the property more than a year - that will be long term capital gain.

 

The father generally should report his share, but because he used the property as a primary residence - his gain is not taxable and generally he doesn't need to report it.

 

Let me know if you need any help.

 

Customer: replied 7 years ago.
Thanks for your reply. I have a couple of follow up questions....would the donor's purchase price would be what they paid for the house, when they purchased it from her parents back in 1973 ? There weren't really any improvements which would add much value over the course of time. The house ended up selling for $240,000.

Is there a place within TurboTax to report a gift that you are aware of? If not, can we submit a separate Schedule D from our TurboTax submission?

Expert:  Lev replied 7 years ago.

If the house was purchased in 1973 - yes that purchase price would be the basis.

There should be improvements over these years - I suggest you to investigate.

At least I might guess that the roof was replaced at least twice...

Check if windows and/or doors were replaced?

Trees were planting?

etc...

 

The gift is not a taxable income and is not reported on the tax return.

there is a separate gift tax return that should be filed by the donor - in your situation by the father in 2005.

A recipient of the gift - does not need to claim it as income. Please see for reference IRS publication 525 - http://www.irs.gov/pub/irs-pdf/p525.pdf

graphic

 

The donor - if he/she is an US person - would be required to file gift tax return (form 709 - http://www.irs.gov/pub/irs-pdf/f709.pdf ) if the gift is more than $11,000 per person per year (for 2005).

There will not be any gift taxes unless lifetime limit of $1,000,000 is reached.

 

Customer: replied 7 years ago.
So, if I'm understanding you correctly, the siblings, who each received a one-time amount of $11,825 do NOT need to report this income?
Expert:  Lev replied 7 years ago.

I will repeat my statement from above

Each sibling will report his/her share of the proceeds and basis and should calculate the capital gain on the schedule D.

Because they owned the property more than a year - that will be long term capital gain.

 

They did not need to report the gift as income which they received in 2005.

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