Have a Tax Question? Ask a Tax Expert
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?
What kind of trust was it? Revocable, Irrevocable or estate trust?
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.
You will need to include something showing that you and your brother were the beneficiaries who received the proceeds.