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Discussion:Gain or Loss on sale of home by Estate

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Discussion Forum Index --> Basic Tax Questions --> Gain or Loss on sale of home by Estate


Discussion Forum Index --> Tax Questions --> Gain or Loss on sale of home by Estate

Illini (talk|edits) said:

9 August 2013
Home appraised at date of death at $250,000. Representative told me they really wanted this young couple (daughter of a friend of the personal representative) to have the home to preserve the integrity of the neighborhood that the representative grew up in as a child, so they gave them "gift equity" at closing of $10,000. Home sold for $225,000 (proceeds realized were of course $215,000). Assuming no other sales costs, does the estate have a $25,000 loss or a $35,000 loss?

Kevinh5 (talk|edits) said:

9 August 2013
maybe neither? Maybe the loss belongs to the beneficiaries?

Spell Czech (talk|edits) said:

9 August 2013
Who are "they" that gave a gift?

Seems to me a *gift* would never result in a loss. But I don't do "gift equity" transactions.

Illini (talk|edits) said:

9 August 2013
1. The estate sold the property (using the personal representative).

2. Kevin, doesn't the loss flow through on the estate K-1, so it is an estate loss flowing through for the benefit of the beneficiaries? 3. How much is the loss? IOW, does the gift of equity increase the loss because it reduced the proceeds realized?

Kevinh5 (talk|edits) said:

9 August 2013
Randy, have you read some of the other discussions on this topic? Especially see Dennis' comments regarding who actually realizes the loss.

Taxmonkey (talk|edits) said:

9 August 2013
Bargain sale. It seems that what you are calling a "gift of equity" is a bargain sale. The real question is whether you have ANY allowable loss on a bargain sale.

Illini (talk|edits) said:

9 August 2013
That doesn't help me Kevin -- I looked and the closest on point was a long discussion about gifting of equity on sale of property to a related party (Usually kids buying it from their parents). I'm not sure it pertains to non-related parties.

What would be helpful is to point me to the link of the specific comments you are referring to in Dennis' post, and I will gladly read them.

Monkey --- do you have any further cites on "bargain sales"?

Kevinh5 (talk|edits) said:

9 August 2013
I would search using the terms

estate sale residence Dennis

or

estate loss home Dennis

etc

Kevinh5 (talk|edits) said:

9 August 2013
The point being that in many states the real estate devolves to the beneficiaries at death, and therefore the sale should be reported on their 1040s, not the estate's 1041. I don't know Maine law.

Taxmonkey (talk|edits) said:

9 August 2013
26 CFR 1.1001-1(e)

(e) Transfers in part a sale and in part a gift. (1) Where a transfer of property is in part a sale and in part a gift, the transferor has a gain to the extent that the amount realized by him exceeds his adjusted basis in the property. However, no loss is sustained on such a transfer if the amount realized is less than the adjusted basis. For the determination of basis of property in the hands of the transferee, see § 1.1015-4. For the allocation of the adjusted basis of property in the case of a bargain sale to a charitable organization, see § 1.1011-2.


In this case, client wants $10k to be a gift, but why only $10k? why not $35k?

Ckenefick (talk|edits) said:

10 August 2013
Assuming estate is the proper seller of the asset (based on K5's and Dennis' comments), and assuming you really intend to deduct a loss on this transaction (in light of Dennis' long-standing admonition, "A sale proximate in time to death is the best indicator of DOD FMV"), I say you deduct the $35k. True lifetime gifts are typically only made to family members. And sometimes made to very, very, very close friends. To this point is the fact that what you describe is not something made out of love, affection and detached generosity. Moreover, it is not $100k or 1/2 the purchase price. It is a small amount in the grand scheme of things. And perhaps a concession to move the property quickly. It was made to keep deadbeats out of the neighborhood. Thank God people like your client don't live in my neighborhood. They would a kicked my ass out of here long ago. The only reason I mow my lawn is to get a fractional home office tax deduction. And you're damn right I 1099 the lawn boy. And every time he complains about me cussing at him, I add a few hundred bucks of phantom income to it. So far this year, he's made $12,457.39, at least according to *my records.* LOL.

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