How do we deal with taxes on a house owned by 3 people? 4 Answers as of February 04, 2011My deceased father-in-law placed his house in his 3 kids name about 15 years ago, naming them as owners. He also made it out to them as a gift. Upon his death in March of 2010 we sold the house. The 3 kids received about $ 9,800 each. What records do we need for taxes and how do we go about it for a straight 1040 ez form?
Steven J. Fromm | Steven J. Fromm & Associates, P.C.
To calculate your gain, you must use what is called carryover basis when you receive the property by gift. So you must get the amount your father-in-law paid originally for the home, plus all capital improvements throughout the years. This can be a daunting challenge to uncover all the details. This is why most estate planners would advise the family to have the property transferred at death through a will. That would have allowed a step up in basis to the date of death which would have resulted in very little capital gain. Under your factual scenario you will probably have a lot of capital gain here since the carryover basis may be very low. The gain would be reported on the Form 4797 which would then go to the Schedule D.
Answer Applies to: Pennsylvania
Meyer & Yee, LLP | Kent W. Meyer
You can't do an EZ. You need to know the date of death fair market value to use as a basis. Divide this by three. Then divide the selling price by three and subtract in each case. This should be long term capital gain. I'm assuming the kids don't live in it.
Answer Applies to: California