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My sister sold our parents house at closing they said she

Customer Question
my sister sold our...
my sister sold our parents house at closing they said she would have to pay taxes on that money don't know how that works, my name is*****: When we are ready I'll take you to the appropriate web page.
Customer: Well I need to go to lunch can i get back with you in about an hour
JA: Do you share ownership of the property? If so, is it as tenants in common, or as joint tenants?
Customer: shes power of attorney my name is ***** ***** any documents check is in her name but i will get half of the money and want to pay her half of the taxes owed out of my half
JA: When we are ready I'll take you to the appropriate web page.
Customer: ready
JA: Is the employment "at will," union, full time, or part time?
Customer: full time
JA: Anything else you want the lawyer to know before I connect you?
Customer: my sister makes 35K a year
Submitted: 4 months ago.Category: Tax
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Answered in 4 minutes by:
7/26/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. My name's Lane. I can explain this for you.

...

If there is a GAIN on sale then the gain will be taxed at the lower long term capital gains rates.

...

Capital Gain, is Sales price MINUS Tax basis.

...

And Tax Basis is normally purchase price (plus improvements to the property).

...

However when you receive something through inheritance that basis is "stepped-up." (to the Fair Market Value of the property on the date of death of the person leaving it to you).

...

So, MANY times, when a house is being sold within a year or so of the death, (becasue property values haven't gone up) there IS no gain, a very small gain, or sometimes even a small tax loss.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

Long-term gains and qualified dividends taxed at

...

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket

...

Her income being at 35000 (depending on how she files - single, married filing jointly) means that SOME of the gain will likely be above that zero % bracket, but likely not all of ... and maybe none ... IF there IS a gain.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will compensate me for the work here.

Thanks,

Lane

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

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Customer reply replied 4 months ago
my father passed June of last year my mother is still living but has alzimers and in a Nursing home signed the house over to my sister she sold it and the final check to her was $57,490.00
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

OK that changes things, but maybe only a bit.

...

If the house was 100% in your father's name, then the basis is it's market value last June.

...

But if the house was jointly owned, then there will be a step up on half of the basis, but 1.2 of the basis will be your mother's basis.

...

Example:

...

They bought the house for 20,000.

...

Lets assume that it sold at market value of 57490.

...

There would be no gain on 1/2 of the house, but there would be a gain of (57490 / 2) - 20000 = 8745

...

at 15% the tax on that would be 8745 x .15 = 1311.75

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

So to recap, if 100% owned by your father and left 100% to your mother then sold, there will likely be no gain (becasue your sister would have gotten that step-up passed to her in gift.

...

If the house was jointly owned by your mother and father, there's be a small gain (becasue there WOULD be some gain on the 1/2 that your mother has owned all along the way, and gifted to your sister)

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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