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Discussion Forum Index --> Advanced Tax Questions --> SALE OF HOUSE IS ESTATE
Discussion Forum Index --> Tax Questions --> SALE OF HOUSE IS ESTATE
TAXESIDO (talk|edits) said:
| 26 February 2008
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| My client walked in with a 1041 that showed no capital gains. There was a house in the estate which she said her 1/2 was sold to the other beneficary. The attorney told the preparer of the 1041 that it was not a sale just a distribution (he got the house she got cash). My problem with that is the only thing in the estate was the house. So the other beneficary had to take a loan on the house to pay off my client. This estate took a long time and the value of the house has increased a good amount. The attorney said the person with the house would have the basis on date of death for 100% of the property if he ever sells (which hurts him not my client). I just don't want him to decide when he goes to sell the house that he bought her out at the higher amount and she should have paid capital gains.
Any thoughts.
Thanks
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Kevinh5 (talk|edits) said:
| 26 February 2008
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| It is all I can do to worry about my own clients, I don't spend much time worrying about someone else's.
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Kevinh5 (talk|edits) said:
| 26 February 2008
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| Having written that, have you considered that it might be YOUR client who has indeed sold her 1/2 interest in the home?
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TAXESIDO (talk|edits) said:
| 26 February 2008
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| I am worried about my client. What if he comes back and says that she should have reported her 1/2 of the gain.
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TAXESIDO (talk|edits) said:
| 26 February 2008
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| Yes I have considered that, which is why I am asking the question. I feel the 1041 is wrong as does my client. She has no problem paying the capital gains. She just wants it all done right.
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TAXESIDO (talk|edits) said:
| 26 February 2008
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| I was asking for opinions as to what other people thought. Just distribution or sale?
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Kevinh5 (talk|edits) said:
| 26 February 2008
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| It might be state law specific as to when the real estate passes to the beneficiaries: at date of death, or when estate formally transfers title.
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Dennis (talk|edits) said:
| 26 February 2008
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| There is no sale unless amounts exchanged reflect date of distribution values rather than date of death values.
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WesR (talk|edits) said:
| 26 February 2008
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| Hi you have answered your own question she sold her 1/2. She got the cash for her 1/2 she inherited and he got the house. She recognizes gain to the extent it exceeds her 1/2 date of death value. He gets a step up for the 1/2 purchase from her. And if he sells it down the road thats how I would treat it for him. You worry about you own client. If the lawyer and the "other" guy cannt figure it out doesnt control how you report THE SALE for your client. bye
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Dennis (talk|edits) said:
| 26 February 2008
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| Wesley is wrong about the lawyer and only right if she got more than half date of death value. If so there is no 1041 reporting. The house was distributed and she sold to him individually. If at date of death value transaction is merely an exchange as part of distribution. (Why, Wesley asks? Suppose the house was worth less?)
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WesR (talk|edits) said:
| 27 February 2008
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| Hi you are so predictable Dennis. You agree she sold it to him (but somehow you agree with the lawyer who thinks there is no sale) and as you correctly restated my answer she has a gain if she got more than DofD, thanks. If you want a clarification from the OP that she sold it for a loss ask the question, get the facts and then we can answer that one. I just might know that answer but I tend to answer peoples questions that are asked and if I am confused about the facts I ask for clarification before going on about the many alternatives there maybe. bye
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Dennis (talk|edits) said:
| 27 February 2008
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| I sympathize, Wes. The other day I couldn't read either. There is no 1041 transaction. House is distributed. If cash represents date of death value it is an exchange. If cash represent market value it is a sale. If sale is at a loss, the loss is not recognized. ♫
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WesR (talk|edits) said:
| 27 February 2008
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| Hi you da man. going home bye :)
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TAXESIDO (talk|edits) said:
| 27 February 2008
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| The house was worth more than date of death and this all took place during probate estate. The son got the house and she was given cash. Again all done during probate and ordered by the courts. So I believe the 1041 should reflect this. Why would she report sale outside of estate when it was done during probate.
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TAXESIDO (talk|edits) said:
| 27 February 2008
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| Dennis you also stated if a loss, loss would not be recognized. Why not it was inherited property not a personal residence.
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TAXESIDO (talk|edits) said:
| 27 February 2008
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| Dennis you also stated if a loss, loss would not be recognized. Why not it was inherited property not a personal residence.
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Dennis (talk|edits) said:
| 27 February 2008
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| Well...for one thing if by odd chance the court actually ordered a sale instead of merely approving distribution, gain would be recognized by residual beneficiaries pro rata. For another, you have given us no understanding of the length of time involved since date of death, whether someone has been using the property, to what extent the dispute involved date of death appraisal or what state this is all taking place in.
Losses between related taxpayers are problematic.
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Jctmstx (talk|edits) said:
| 27 February 2008
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| It was a sale even if occured in probate. Recognize the gain ignore the loss if applicable. Protect your client don't listen to the other parties counsel they don't represent your client.
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Hunter07 (talk|edits) said:
| 27 February 2008
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| I'm not any help, but I have a related question: Inherited House, held for 6 years during probate unoccupied. Flood damages home. Home is sold and cash is distributed to heirs. My client received the cash. Does she have a loss related to the fact that the house was worth more on the date of death than at the settlement of the estate?
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