Ask TaxMama ... Passing On ... The House ... September 20, 2002

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Tax Information With A Mother's Touch

Published by Eva Rosenberg, MBA, EA


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Passing On ... The House

» From: Canton, NY

Dear TaxMama:

My mother recently passed away. Before she passed she sold her home to my brother.

At the time of her death she owed taxes on an inheritance that she had received a few years back.

When she died she had no money and no estate.

Can the IRS come after my brother or any family member for the $6,000 she owed in inheritance tax?

Robert

Dear Robert,

Sorry to learn about your mother. I'm sure you and your brother will miss her, even without the financial issues left behind.

Can IRS come after him? It all depends.

How soon before her death she sold the property
Did she sell it to him at market price, or substantially below market? (10% or 15% is not substantial. It just avoids the commissions and closing costs.)
Was there an IRS lien on the property when she sold it? And did she not record the sale so IRS wouldn't realize she had tried to bypass the lien.

If IRS decides to pursue this balance due, they might look into the transaction and decide it was a gift (sold waaaaay below market). If the gift took place within (I think) three years of death, it can potentially get drawn back into her estate.

If it wasn't a gift, but IRS had a lien on the property and she went around it .... you bet they'll look at the transaction. So, please be careful.

Under no circumstances lie to IRS. Mistakes are one thing. (Not providing information that isn't requested, well, that's another.) But deliberate lies can bring all kinds of fraud, conspiracy and other unpleasant charges.

Incidentally, I don't understand how she could owe an inheritance tax. Those are handled by the estate of someone who died. If she inherited property, the estate should have taken care of the tax.

If an estate tax return was filed, money should have gone with it. Otherwise, IRS may still follow those assets that she inherited to collect the taxes due.

On the other hand, what she may owe is taxes on sale of something she inherited. That would make much more sense.

Best wishes,

Eva Rosenberg
Your TaxMama

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