Inheritance?

[NancyMO]

Taxpayer's husband passed away in 2010. Unknown to her, her late husband owned cattle that he kept on someone else's property. The landowner retained, fed, and cared for the cattle after the husband's death, then sold them in 2012. He then presented the widow with a check for $39,000.00. She wasn't in the business of farming. Would this be inheritance or should she file Schedule F, claiming the FMV of the cattle as cost against the sale?

[jainen]

>>her late husband owned cattle that he kept on someone else's property.<<

Hmmm, THAT'S an interesting twist on an old, old story!

[NancyMO]

I didn't think I had to go through the whole history...they were separate until right before he got sick and died. She had no clue what he was doing while they were separated. I just thought maybe someone would know a quick answer. It's April 9th and my head hurts and I'm grumpy.

[jasdlm]

Did they file separate tax returns in 2010?

[NancyMO]

No. They did not file. She had no income in 2010 and he was receiving VA disability. Her job in 2010 was taking care of him. Prior to that, when they were separated for several years, she filed head of household, reporting her income.

[gfizer]

I wouldn't call it inheritance. She inherited the cattle and would therefore receive a step-up in basis to the fmv at the date of her husband's death. Sale should be reported on Form 4797.

[DANRVAN]

This could have been a lease situation where the lessee provides for all the care of the cattle (feed, pasture, veterinary expense etc.) and the owner receives a percent of the calf crop. Just like a crop share arrangement which is reported on Form 4835.

If that was the case, you will need to determine how much of the income was for breeding stock vs. calves and allocate between 4835 and 4797, after you have determined the basis.

The only thing certain is you will need to file an extension to allow more time for research.