Re: Another tax question, stickier

[...]

>> later. The county assessment of the property gave his share as X in >> 1999. When the estate finally settled county assessment was over 3X, >> but we only got 2X (in order to avoid legal action to remove her as >> PR, or other legal action, we took what she'd offer). So, we have >> capital gains tax to pay on half of what we got. > > "County assessment" is not necessarily the fair market value (FMV), for > example in California it typically is not even close for property held > any significant length of time. If you have other ways to determine your > basis (FMV on date of death), try to document them. This is an > imprecise activity to be sure, and it's hard to predict if you will ever > be challenged to prove your basis. The IRS instructions for Schedule D > state you are supposed to "attach an explanation of your basis" if you > don't use actual cost (which would be the case for inherited property).

In the county the property is in, the assessment for property taxes is lower than the price the property would sell for. I'm not in real estate, but I work at a large institution and have heard story after story of people getting 25 or 30% more than the county's property tax assessment. However, the sister used this as a ball park for what it was worth then, and what it is worth now (this was to her advantage....it was clear if we wanted to buy the property it would be assessed and we would have had to pay more). Additionally, a church had to get it's share when the father died, and the executor paid off the church's share as its percentage of the county's assessed value (for taxes), thus adding the church's share to her percentage ownership.

A formal real estate appraisal at time of death would be best, otherwise > data on comparable home sales at that time, such as the "competitive > market analysis" that a real estate agent might provide, is also a good > source.

None was done. Hubby wasn't living near by and the executor just moved in and stayed when the father died. Will was never finished, property remained in dead father's name, sister paid the taxes and raised goats on it.

Since the value of the property was probably more than X at time of death, and we took less than the property value as pay-off this year, I'm thinking we are "safe" in paying capital gain on half of it. If we were claiming the amount the property was worth at time of death was more than what is on the books for the county's assessment, in order to show we had less capital gain, that might be less "safe".

My goal here is not to save every penny. I have deducted my bracket income tax rate for half of the amount we got, and put it aside for when I do our taxes next year. What was left over was sent on to hubby's kids. *My goal is to NOT get into trouble with the IRS*. Anything I over-pay (we are talking about a tax payment of 4000 bucks, not tens of thousands) is money out of the daughter's pockets, not mine. All the time, effort, insult-bearing, and soul-searching has been enough, I'm not going through extra hoops for these girls. I just don't want to get into trouble...

> Here is the question: Are we supposed to get a statement from the PR >> by next 30 Jan for our 2008 taxes? What if it isn't forthcoming? Can I >> just tell the IRS, truthfully, the amount the property was worth in >> 1999 (easy to prove), the amount we got (easy to prove), do the math >> and pay my tax if a required statement is not forthcoming? > > Was the property sold by the estate and the proceeds distributed? Then > you should receive a Sched. K-1(1041) from the person who prepares the > estate income-tax return, which contains numbers you enter on your own > tax return. Or was the property ownership transferred to you and then > sold? Then you won't necessarily get any form, and yes you should just > report this on your Sched. D. The end result, income tax-wise, should > be the same.

Hubby signed over his interest in the property to his sister, in exchange for money. All 3 other sibs and nieces are signing over their share for an IOU (I knew we'd never get that money without going to court, so insisted on money at time of signing...we will be hated for life, but really I could care less). The reason this is moving forward now, I think, is that she knew the assessed value was going up 24% from

2007 and 2008, and hence was eager to "lock in" on 2007 price (the last week of November 2007, no less). She then did nothing on moving forward on closing, as once she had the "locked in" price, any payment was her money going out the door. I had to threaten to get her to give the attorney the info he needed to contact all parties concerned, etc.

Given past history, I will not get any form from this sister in law without calls and possibly threats. Should I just write this all out, have my attorney give it a glance for proper lingo and tone, and send it in with my 1040?

States have different rules for handling estate property and probate. > Also, note that the IRS instructions for Form 1041 require estates that > are open for more than two years to attach an explanation for the delay > in closing the estate. This was an estate and not a trust, right? Yes, not a trust. > It is very common for one or more siblings to behave abominably. If > there was any dysfunction in the family while they were growing up (and > let's face it, for most of us there was at least a little), it all comes > out and gets replayed.

Our biggest crap shoot in life is who we are born to. I am grateful daily for my genes and upbringing, and hubby is happy to have married into a honest family who knows that good fences good neighbors make.

I am also grateful for your help.

Reply to
kalanamak
Loading thread data ...

kalanamak wrote: [...]

All I can offer is to repeat that you can and should report capital gains from disposition of inherited property on your Schedule D, regardless of whether any tax reporting form was ever sent to you or the IRS by a third party.

While *you* may be sure you are paying as much or more than you "really" owe, the IRS doesn't know that, so keep as much written documentation as you can regarding property valuation and receipts/disbursements of cash, in case they ask you for it during the open period after your filing date (generally three years). If you attach a statement to your original return, keep it as brief as possible, no one at the IRS will read it anyway unless they select your return for examination.

Finally, you may need to make one or more quarterly estimated payments (the next due date is 9/15/08) before the return due date to avoid late-payment penalties. Don't forget any impact on your state taxes also, some states do not have any special rate for capital gains.

-Mark Bole

Reply to
Mark Bole

Check!

Check!

Will look into it!

Thanks all..

Reply to
kalanamak

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.