A client's mother sold a rental home in 2008. Her mother died in 2011. The client (daughter) has just received a letter from the IRS stating that she owes over $11,000.00 for the capital gain on the rental house that was sold in 2008. The house was only in her mother's name. Is the daughter liable for her mother's tax debt? Is there a statue of limitations? Thanks
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What property or cash did the heirs inherit? If there was no inheritance then I seriously doubt IRS will be able to collect from a dead taxpayer!
One of my client's father who passed away in 2010 had a balance due from one of his prior year's return. The IRS sent my client notice of lien etc. because he had claimed a life insurance policy and filed the final return. He spoke to IRS and was asked to send a statement that his father did not have any assets that the son inherited (life insurance did not count because he was a beneficiary) and a copy of the death certificate etc. and the case was closed. No more notices.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
No. The daughter is not liable for the mother's debt. I would assume the estate has been long closed. Send the letter back and notify them that she is deceased.Originally posted by lbeeson View PostComment
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The daughter is liable for the mother's debt if the daughter inherited assets from the mother's estate. The 3 year statute of limitations for income taxes and estate taxes applies to the time limit for assessing the tax. For example, the IRS has 3 years to assess tax on the mother's 2008 Form 1040, the year she sold her rental property. If the IRS already assessed the tax to the mother (within the 3 year time limit), the IRS has 10 years to collect. That collection period does not end with the death of the taxpayer but carries over to whomever inherited assets of the decedent.Originally posted by Burke View Post
It is likely the mother's unpaid tax debt from 2008 was already assessed, and the mother simply still owed part or all of that tax debt at the time of her death in 2011. Assuming the daughter inherited at least as much as the mother's unpaid tax debt, the daughter now owes that debt.Last edited by Bees Knees; 06-10-2014, 05:07 PM.Comment
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Did the estate distribute assets to any beneficiaries? If so, the tax debt should have been paid first.
If the estate did have assets, the executor of the estate and/or the beneficiaries could be responsible for the unpaid taxes.
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