Sale of main home

[Lucky]

New client is single and the trustee of his revocable trust. He transferred his mutual funds and bank accounts and the title of his pricipal home to the trust.
he sold the home in 2012 and made $500,000 he met the used and owned requirements to exclude the 250k gain. He purchased the house back in 1961 and cannot find the settlement document for the purchase of the house. To report the basis and improvements of the house, can I just rely on what the client told me and put a preparer's note or is there way to find out the purchase price was? Is there any different reporting method than just report on the Form 8949/Schedule D and the same applies to the interest and dividend income from the mlutual funds. Any suggestion or advice would be appreciated.

[ddoshan]

There should be court records and documentation I would think. I know I can look up online the sales history of a home via the county records.

[mastertaxguy]

Why would you use form 8949?

New client is single and the trustee of his revocable trust. He transferred his mutual funds and bank accounts and the title of his pricipal home to the trust.
he sold the home in 2012 and made $500,000 he met the used and owned requirements to exclude the 250k gain. He purchased the house back in 1961 and cannot find the settlement document for the purchase of the house. To report the basis and improvements of the house, can I just rely on what the client told me and put a preparer's note or is there way to find out the purchase price was? Is there any different reporting method than just report on the Form 8949/Schedule D and the same applies to the interest and dividend income from the mlutual funds. Any suggestion or advice would be appreciated.

1. Why would you need form 8949? The revocable GRANTOR trust is disregarded is it not? SEE TTB 21-20; see left column under optional methods (Optional method 1).
2. Put the burden on the TP to come up with basis.
3. You indicate the TP "made $500,000.00." Was that the gross proceeds of the sale, or what he thinks he made over his basis?
4. Inquire of any imporvements to the property over the years, including special tax assessments for such things as sidewalks, street improvements, etc.

[Burke]

1. Why would you need form 8949? The revocable GRANTOR trust is disregarded is it not? SEE TTB 21-20; see left column under optional methods (Optional method 1).

You answered your own question. The RLT is disregarded so, therefore, if he has a capital gain to report for the excess gain over $250K, the only place it can go is on 8949 -- flowing to Sche D on the TP's 1040. TTB 21-20 states "Income is reported on the grantor's 1040 as if the trust did not exist."

[mastertaxguy]

You answered your own question. The RLT is disregarded so, therefore, if he has a capital gain to report for the excess gain over $250K, the only place it can go is on 8949 -- flowing to Sche D on the TP's 1040. TTB 21-20 states "Income is reported on the grantor's 1040 as if the trust did not exist."

Opps. I read 4797 not 8949. No excuses. I just screwed up. Thanks for the correction.

(Busy morning).

[DMICPA]

Gain exclusion for Widows/Widowers

Husband and Wife bought home in 1978 for $200,000. Husband died in 2011. Wife (surviving spouse) sold home in 2012 for $500,000 less costs of $45,000

Of course the wife did not get an appraisal at husband's death to obtain the step up in basis.

The wife can still claim the $500,000 exclusion because they met all the rules and the home was sold within two years of the husband passing.

Now the Step up does not mean as much. If I just used the original cost there would be no tax. If I used zero cost, there would be no tax.

Are there any special disclosure requrements to be listed on the return as the wife is filing as Single because the husband died in 2011. On the surface, it would seem that only the $250,000 would be allowed for the 2012 return but she actually gets the $500,000.


Getting near the end.

Bob

[taxea]

There should be court records and documentation I would think. I know I can look up online the sales history of a home via the county records.

You're right. The Bureau of Conveyance would have the purchase records and the escrow company may also have archieved them.
The Assessors office and building department also may have records of building permits. Businesses that did the work may still have invoices.

[Burke]

Of course the wife did not get an appraisal at husband's death to obtain the step up in basis.
Bob

It's not required that an official appraisal be done if FMV can be established by other means.

[DMICPA]

Appraisal not required

I did not know that. Most clients do not obtain an official appraisal. I have had very detailed market analysis reports done and I use what I have.

If I have input at the time of death, I recommend an appraisal. If not, I have them at least talk to a Realtor and try to get a reasonable market value.

With this $500,000 exclusion, my client would not have a gain as the home sold for $500,000 with $45,000 in costs. I happen to know they paid $200,000 for the home in 1988. When the spouse passed away in 2011, they should have had a step up and some kind of DOD value taken but they did not.

But I will use a market analysis done by the son ($546,000) and no matter what, the widow gets the $500,000 exclusion because the husband died within two years of sale so I should be alright.

[Burke]

I recently went down to the county offices to find what a client paid for a commercial property in 1988 that he sold last year. The client went into a nursing home and many papers were thrown away in the move. It took some digging, and she had to go in the back and pull an old paper, handwritten card record (before computers) but there it was.

[DMICPA]

Property Records

I can't imagine what it would be like to try to search records in Los Angeles. That, if possible, would take forever and expect no help from the County Clerk.