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My father in law needed a co-signer over 30 years ago to…

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My father in law...

My father in law needed a co-signer over 30 years ago to purchase a home in Massachusetts. His oldest daughter, now my wife, was placed on the mortgage and the deed at that time. He has since died and wanted the proceeds of the sale of his house to be distributed amongst all his children. Although my wife remains on the deed she is not seeking, nor has she ever staked a claim to this property. She has never taken a deduction, etc. and we never claimed this property as an asset while seeking our own loans.My question is does the IRS look at this differently i.e. a capital gain vs. an inheritance as her name is ***** ***** deed (each child stands to make about $150K).

Accountant's Assistant: I love the idea of making big money with investments, but there are so many things that could go wrong. The Accountant will be able to help you. Is there anything else important you think the Accountant should know?

...and thanks.

Submitted: 4 months ago.Category: Tax
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Answered in 10 minutes by:
3/20/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,142
Experience: Taxes, Immigration, Labor Relations
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The IRS will follow so-called he assignment of income doctrine which holds that a taxpayer who owns the property that the taxpayer owns generally cannot avoid liability for tax on that income by assigning it to another person or entity.

If your wife is a legal owner - she will be responsible for income taxes on income realized from that property regardless of any family agreements.

These agreements may not override or take the precedence over the tax law.

What we need to do - to verify whose names were on the title since the property was purchased - and any changes over the time.

Then - we need to determine the basis of the property - and estimate the gain.

The property woudl be considered as inherited if included into the estate of the deceased.

If it was not owned by the deceased - and was not a part of the estate - there is no stepped up basis.

If a part of the property was included into the estate - there will be a stepped up basis on that part.

We need to be clear on that.

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Tax Professional: Lev, Tax Advisor replied 4 months ago

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