3 sisters inherit home

[pete]

Tax payer's father died and left T/P and her two other sisters the father's house. The house FMV was $300,000.00. The two sisters wanted to keep the house but the T/P wanted her share. ($100,000.00). So they went to a lawyer and he set it up for the T/P to sell her share for one dollar (to release her name from the trust). Now the two sisters take out a loan on the house for $100,000.00 and off she goes. T/P was informed she does not have to report this to the IRS. I say she must or else. This must me something new. PS no appraisal. I would think she would a least report it, no matter how I look at this it is still a sale. Is this legal?
Pete

[joanmcq]

I would say reportable, but if basis (stepped up at DOD of father) was $100,000 and she got $100,000, no gain or loss.

[Jesse]

I guess I'm confussed.

If the they inherited the property and the value at DOD is $300,000 then the sister that was bought out for $100,000 would have no gain or loss. Although she would have to report the sale.

Did they indeed pay $100,000 to buy the sister out?

If so why did the lawyer write the sale as $1?

[JoshinNC]

Because lawyers are STUPID

I guess I'm confussed.

If the they inherited the property and the value at DOD is $300,000 then the sister that was bought out for $100,000 would have no gain or loss. Although she would have to report the sale.

Did they indeed pay $100,000 to buy the sister out?

If so why did the lawyer write the sale as $1?

Now you have created a gift from the selling sister to the two buying sister's in the amount of $99,999 which the selling sister now owes gift tax on. Can you say malpractice?!

[Jesse]

Now you have created a gift from the selling sister to the two buying sister's in the amount of $99,999 which the selling sister now owes gift tax on. Can you say malpractice?!

Although gift tax may not be due, both sisters will need to file a gift tax return for 1/2 of the $99,999 that they just gave the sister that they sold the house for $1.00, correct?

[pete]

sisters inherit home

This was a Living Trust and they directed the Trustee(older sister) to excute and deliver a deed for the property to the sisters in consideration of $1.00. Now the T/P is no longer on the deed for it was transferred for $1.00. The sisters then take out a loan on the house and give the T/P her share. Is this a legal procedure, and must it be reported to the IRS?

[Kram BergGold]

No gift

To me, the transfer for a $1 was a sham transacton. What really happened was the two sister's bought out the one sister. so the seller reports the sale and claims her basis.

[Burke]

Since the transfer of deed required consideration, the $1 just satisfied the law in order to transfer it out of the trust to the 3 sisters. Then the two owners who wanted to keep it paid the 3rd sister $100,000 for her 1/3 share. 3rd sister has sale for $100,000 and basis of $100,000, no gain or loss, and the other two sisters now have a mortgage on the house they own together. Third sister reports on Sche D -- end of story.