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    Basis of house sold

    Hello, I am new to this Tax Book so hope I get everything ok. I have a client whose mother passed away in the fall of 2009. She left everthing to my client and siblings.

    My question is in regards to the sale of the home mom lived in. My client and siblings have not lived in the house for many years.
    I am not sure yet if the mother signed the house over to my client and siblings before she died or left to them after her death. I was looking for something in the TB as to what the basis for this property would be since my client and her brothers sold the house to a non related party in November 2009.

    Any help would be greatly appreciated.

    Thanks,

    #2
    Welcome

    Welcome to the Board!

    I believe we need some more information about your scenario, but here is one scenario.

    IF Mother passes away and left home to children (through will, trust, etc) - the basis is FMV of the home on Date of Death - so an appraisal should be obtained. The children then would use that FMV for their basis on the sale.

    I don't have my 2009 Web CD yet, but from 2008 WebCD Taxbook, see page 6-3, pub 544, pub 551, and there are probably a few more.

    Keep us posted.

    Sandy

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      #3
      You Need More Info

      You simply have to find out how the sisters obtained title to the house. You also by the way have to know who is going to sell the house, the estate or the sisters. I have no idea about the Estate (don't do them) and my next two statements are only relevant if the sisters sell the house.

      The basis of gift property is generally its adjusted basis in the hands of the donor immediately before the gift.

      The basis of inherited property is generally its fair market value on the decedent''s date of death or alternate valuation date chosen by the executor of the estate or the personal representative if there is one of the latter.

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        #4
        Simple answer for a start

        Without getting overly complicated with the potential "what ifs" here is the simple answer:

        If inherited, the basis is obtained from the information shown with the estate filing value at time of death. The "stepped up" basis generally is more favorable for later sales.

        If the property was transferred to the family members prior to death, then the donor's cost basis also transfers to them. This means original cost (which may be quite low!) + allowable capital improvements.

        Should the sale be made by the estate, it is possible a Schedule K-1 may also be forthcoming.

        This information should point you in the correct direction. I would not commit it to memory, as the estate/gift rules change on 01/01/2010 and who knows what will happen the following year?!?

        Oh yes: I am curious as to what happened to the house during the intervening years. Unused? (repairs for sale) or rented? (more paperwork!)

        FE

        Comment


          #5
          Originally posted by FEDUKE404 View Post
          If the property was transferred to the family members prior to death, then the donor's cost basis also transfers to them. This means original cost (which may be quite low!) + allowable capital improvements.
          Assuming Mom didn't inherit any of it herself her basis might be determined under the old 1034 rules if she bought the house prior to 5-7-97.

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            #6
            Occam's razor

            Originally posted by Davc View Post
            Assuming Mom didn't inherit any of it herself her basis might be determined under the old 1034 rules if she bought the house prior to 5-7-97.
            Which is one of the many reasons why I mentioned the "what ifs" in my earlier post.

            FE

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