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TAX QUESTION. A GENTLEMAN RECEIVED FROM THE TITLE COMPANY…

Customer Question
TAX QUESTION Accountant's Assistant:...

TAX QUESTION

Accountant's Assistant: What state are you in? It matters because laws vary by location.

A GENTLEMAN RECEIVED FROM THE TITLE COMPANY AMOUNT OF PROCEEDS. DOES HE HAVE TO OWN HIS HOME TO GET AN EXEMPTION. THE 250,000 EXEMPTION. HE LIVED IN THE HOME FOR SEVERAL YEARS. IT WAS HIS MOTHER'S HOME. HIS SISTERS HAD TO PAY TAX ON THE 90K HE PAID THEM....CALIFORNIA IS THE STATE

Accountant's Assistant: Has anything been filed or reported?

ONLY TO THE IRS FOR THE AMOUNT HE RECEIVED. NO BASIS NO EXEMPTION. 1099 S FROM THE TITLE COMPANY FOR PROCEEDS IS ON HIS SOCIAL SECURITY NUMBER A CPA TOLD HIM HOW MUCH TO PAY HIS SISTERS AND HE HAS A K-1 FOR THE OVER 90K BUT HE WANTS AN EXEMPTION.

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

CAN HE CLAIM THE EXEMPTION. WHAT DOCS DOES HE HAVE TO HAVE IF AUDITED. PROOF THAT IT WAS HIS HOME? THAT HE LIVED THERE FOR OVER TWO YEARS. I HAVE TAX RETURNS FOR 4 YEARS WITH THAT ADDRESS.

Submitted: 1 month ago.Category: Tax
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Answered in 1 day by:
3/12/2018
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,183
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

He can not claim an exemption if he did not own the home.

The home would have received a step up in adjusted basis to the fair market value at the date of death of his mother.

The amount that would be taxable as capital gains would be the net proceeds he received in excess of the adjusted cost basis. Generally, an appraisal is used to determine the adjusted cost basis at the date of death of the property owner.

Please let me know your follow up questions.

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Customer reply replied 1 month ago
He owned 1/3 with his sister's and each received a k1 for income for sale of home do they get 1/3 of the exemption do they get to invest that in a timely manner and not pay capital gains on that income from the sale of the home if they each get $90,000 can they take 1/3 of the exemption and can they take the $90,000 and reinvest it without paying the state or the AMT to the feds?
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

They don't receive an exemption.

The property in the estate receives a step up in adjusted cost basis on the date of death of the owner.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

To defer capital gains, the property would have to be investment property and the tax payer would have to already initiated a 1031 exchange.

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Customer reply replied 1 month ago
Would the trust have to initiate the 1031 exchange ?
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

If the proceeds were already paid out, then it is to late for a 1031 exchange.

Yes, the current property owner would initiate the 1031 exchange

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 1 month ago

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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