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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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Mother in law sold house for $99,000. House was burned years

Customer Question

Mother in law sold house for $99,000. House was burned years ago and never repaired. She lives on SS only and is bedridden.
Annual SS is $10776. What would be her tax burden?
I would like to know which forms and how to fill them out for the 2014 tax return
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

Hi from just answer. I'm PDtax, and will assist.

If this qualified as her principal residence, there is likely no tax due. She would have had to live there for two years of the preceding five to qualify.

Expert:  PDtax replied 1 year ago.

Since there was a fire, the effect of any insurance would have to be considered. Let me know.

Customer: replied 1 year ago.
The burned, rental house was an investment. No one lives in it and the house was sold as is.
My question is: Does she even have to file? Only income is SS $10,776 annually. She is bedridden and cared for by a caretaker who is paid for with her SS check and son's help.
Should Form 4797 or Schedule D be filled out? I understand that she should not have to report it at all. If she does, please tell me which forms are needed and how to fill them out. Thanks.
Customer: replied 1 year ago.
Oh, there was no insurance on the house but that was years ago and probably does not have a bearing on this matter.
Expert:  PDtax replied 1 year ago.
the property was a rental. Then the sale of taxable and must be reported on from 4797.
The sale must report Depreciation recapture as part of the sale of the 1250 property. You will need your Depreciation history and original basis to report the transaction.
I can't estimate her tax burden without the Depreciation and cost records.
The reason is there are different tax rates for recapture and capital gains. It also means some of her social security will likely be taxable as well.
I can assist, but I would have to ask for a price adjustment. I will send you a quote for the federal tax return prep, assuming you have records you can provide. Accept, and we will have a private link you can use to send me the records.
I know you asked for assistance with completing the form, but that will be difficult to do online.
Thanks. I hope you accept my discounted offer to assist.