Possible house sale of property owned by mother and 3 daughters, Mother still alive

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  • arlo
    Senior Member
    • Feb 2008
    • 285

    #1

    Possible house sale of property owned by mother and 3 daughters, Mother still alive

    If they sold the house the mother lives in which the daughters also own. How would they be affected by taxes.
    I am thinking the mother would not have any tax Lia. The daughters would have to pay taxes on any gain.
    The daughters gain would be the diff. off original cost and fair market value. Anyone agree?

    In looking at older post Burke had post in 2012 that kind of agrees with my thinking.
    Last edited by arlo; 06-10-2015, 04:43 PM.
  • ATSMAN
    Senior Member
    • Jul 2013
    • 2415

    #2
    Originally posted by arlo
    If they sold the house the mother lives in which the daughters also own. How would they be affected by taxes.
    I am thinking the mother would not have any tax Lia. The daughters would have to pay taxes on any gain.
    The daughters gain would be the diff. off original cost and fair market value. Anyone agree?

    In looking at older post Burke had post in 2012 that kind of agrees with my thinking.
    Are they equal owners?
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

    Comment

    • taxea
      Senior Member
      • Nov 2005
      • 4292

      #3
      Atsman is right. It depends on each % of ownership/% of basis. Why would Mom not have to pay any taxes? Wouldn't she have a gain on her share?
      Believe nothing you have not personally researched and verified.

      Comment

      • David1980
        Senior Member
        • Feb 2008
        • 1703

        #4
        Originally posted by taxea
        Atsman is right. It depends on each % of ownership/% of basis. Why would Mom not have to pay any taxes? Wouldn't she have a gain on her share?
        Mom could probably use the section 121 exclusion.

        Comment

        • TAXNJ
          Senior Member
          • Jan 2007
          • 2106

          #5
          Good point

          Originally posted by David1980
          Mom could probably use the section 121 exclusion.
          David - good point.
          If she meets the definition of sec 121. But limited info in original post so original poster needs or has all the facts.

          However, what you suggest may apply depending on all facts.
          Always cite your source for support to defend your opinion

          Comment

          • kathyc2
            Senior Member
            • Feb 2015
            • 1945

            #6
            Originally posted by arlo
            If they sold the house the mother lives in which the daughters also own. How would they be affected by taxes.
            I am thinking the mother would not have any tax Lia. The daughters would have to pay taxes on any gain.
            The daughters gain would be the diff. off original cost and fair market value. Anyone agree?

            In looking at older post Burke had post in 2012 that kind of agrees with my thinking.
            If Mom gifted interest to daughters, the daughters basis would be Mom's basis at time of gift plus any improvements since then that daughter(s) paid for.

            Mom basis (both now and at time of gift) would be original cost, plus improvements and potential step-up if jointly owned and Dad passed.

            Comment

            • New York Enrolled Agent
              Senior Member
              • Nov 2006
              • 1530

              #7
              Originally posted by kathyc2
              If Mom gifted interest to daughters, the daughters basis would be Mom's basis at time of gift plus any improvements since then that daughter(s) paid for.

              Mom basis (both now and at time of gift) would be original cost, plus improvements and potential step-up if jointly owned and Dad passed.
              TAXNJ is absolutely correct - the original poster needs to fill in all the details.

              Having said that, I infer (perhaps incorrectly) that his wording in the thread title leads to mom having a life estate in the house. If that's the case, there are 4 sellers - mom can (assuming she is eligible) use section 121 for her portion. The 3 sisters will pay tax on a (ST or LT) capital gain. If there is a life estate, Table S and §7520 rates must be used to correctly determine the appropriate % to calculate ownership and basis.

              Comment

              • TaxGuyBill
                Senior Member
                • Oct 2013
                • 2320

                #8
                Originally posted by New York Enrolled Agent
                If there is a life estate, Table S and §7520 rates must be used to correctly determine the appropriate % to calculate ownership and basis.

                Sorry to go off on a Tangent, but: I was wondering about the life estate option, but I don't know how it works. Could you briefly explain how to use the table? Is the "age" when the gift was given? How does one determine what "interest" rate to use? Is there anything else a beginner needs to know about calculating Life Estates 101?

                Thank you very much.


                EDIT: I probably should have read §7520 before I asked those questions. :-) That explains the age and interest. If you have any other thoughts or tips though, I would appreciate it. Thanks again.
                Last edited by TaxGuyBill; 06-11-2015, 01:05 PM.

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