Ask TaxMama.Com Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA Volume 6, Issue 243        January 23, 2004

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Too Responsible, Too Early » From: East Hartford, CT Dear TaxMama: A few questions about the following situation: Shortly after my mother-in-law's death, my father in-law added all his 7 siblings to his property deed. Since then he has required moving into an assisted living home because of his health. He's 96. The house was put on the market and sold with the proceeds divided 8 ways. (250,000 by 8). Who, if anyone, pays any tax, the one who receives the 1099-S? If we have to pay on our share, can the "Reduced Maximum Exclusion" rule be used? Or can we meet the 250,000 rule and all pay no tax? Thank You, and hoping to hear from you. Sincerely, Joe Hi Joe, Wow. What a real, crying shame. You father-in-law never should have done that. A really, really, really, bad move. If he had sold the property, none of that $250,000 would have been taxable. By being generous and gifting the property to you all, he wasted a bunch of your money. If only one 1099 was issued in only one person's name, that person will need to show the full amount of the sale on their tax return. THEN, attach a schedule showing the names and social security numbers and amounts that went to each sibling. Add those distributions to the cost (or basis) that would have been allocated to the sibling reporting it. That will result in that sibling only reporting, as a profit, their own share of the profit. It's a bit complicated, if you're not experienced with this. A good tax pro can easily handle this for you, though. Remember, the proceeds of $250,000 are not the profit. Deduct the purchase cost of the house, any improvements and all escrow costs for the purchase, sale and any refinancing of the house. The result will be the taxable profit. If any of the siblings were living in the house for 3 years out of the last 5 years, those siblings's share would be exempt from tax. One more note, Joe, Check with an attorney. I know there has been some case law about elderly people and titles to home. It may be worth a couple of hundred dollars to have someone either research the case law, OR even to get a private letter ruling. Undoubtedly, your father-in-law intended to die in the home. If you can get that kind of dispensation, and have the home regarded as being his at the time of sale, perhaps you might be able to avoid taxes altogether. It may not work. But, it's worth investigating. Best wishes, Eva Rosenberg Your TaxMama

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