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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3170
Experience:  IRS licensed Enrolled Agent and tax instructor
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My mother died in 2014, and she left her house to me and my

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My mother died in 2014, and she left her house to me and my brother. Subsequently we sold it in 2015. We sold it at the fair market value of the home according to the real estate people Do we have to pay any kind of tax?
JA: The Expert will know how to help. Is there anything else important you think the Expert should know?
Customer: We never heard from the I.R.S. on the sale of our home, but the Calif. Franchise Tax Board say's our mother owes over $10,000 in taxes because of the sale for the year 2015, Like I said, my mother died in 2014.

Hi. My name is ***** ***** I will be happy to help you.

Was the house legally transferred to you and your brother before it was sold? How much did you sell the house for?

If you sell an inherited property you will calculate your capital gains using fair market value of the house on day of inheritance. Generally, if you sell an inherited house within 12 to 18 month you will not have any capital gains.

However, if the title of the house was not transferred to you and your brother, the sale could have been reported as sold by your mother. FTB has no way of knowing that your mother died in 2014 unless you filed a probate or estate return.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

Customer: replied 1 month ago.
The house was sold about 6 or 7 months after my mother died. The house was still in my mothers name. It was a trust.
Customer: replied 1 month ago.
I really can't afford it. The house was sold at the fair market value.

What kind of trust was it? Revocable, Irrevocable or estate trust?

Customer: replied 1 month ago.
I'm not sure, I'd have to call my lawyer to find out. But can you tell me the difference on each one?

If she had a revocable trust she had full control over the house. If the house was in a irrevocable trust, the deed would list the trust as the owner and your mom would have no control over it. Estate trust is created for any leftover asset that did not pass directly to the beneficiaries, like certain retirement accounts.

If your mom was listed as owner, I am assuming the trust was revocable, with you and your brother as beneficiaries. The title agency did not transfer the title to you before sale and issued a tax document (1099S) reporting the sale to your mom. And because she did not file any tax return, CA FTB assumed that the entire proceeds are taxable income to her.

You need to call the CA FTB and explain what happened. You may also need to contact the title agency, find out what had been filed and request corrected 1099S.

Customer: replied 1 month ago.
The house was sold in 2015, and she died in 2014, I just found out, she left us the house in a living trust and the house was still in her name at the time of her death. I'm sending a letter to the Franchise Tax Board explaining the situation and maybe that'll
take care of the problem. A letter with a death certificate included.

You will need to include something showing that you and your brother were the beneficiaries who received the proceeds.

Customer: replied 1 month ago.
I'll send a copy of her living trust. Thank you for all your help.

You're welcome.

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