Taxpayers father died about 5 years ago. Left estate in a bit of a mess, but heirs (three siblings) were able to pretty much straighten it out. Here is what I can gather so far from talking to the taxpayer:
One situation involved a pending sale of a piece of land to a developer. The heirs felt it was a bargain sale and thought the developer had taken advantage of their elderly and sickly father by getting him to agree to sell it for such a low price.
Although only one of the siblings was named by the father to inherit this particular property, the siblings agreed that the father always had the intent to divide his estate equally. So, in order to pursue this matter the siblings formed a partnership, engaged legal council and proceeded with a suit against the developer.
Heirs prevailed and received a cash payment in 2007.
Taxpayer received a K-1 from the partnership, prepared by a local bookkeeper, for the amount of the settlement he received, close to $50,000, as a "short-term capital gain."
He considers that if this was proceeds from inheritance, it should only br taxable to the extent the value was more than the value of his share at the time of his father's death. He then considers if his brother voluntarily gave the share of the proceeds to him out of a sense of fairness, rather than an obligation, then it is a gift, and so would not be taxable to him.
This is a tricky question, and doesn't seem to lend itself to a snap answer. What do you guys think?