Siblings sell mom's house

[Ray in Ohio]

8 years ago mom transfers her home to her 4 Sons and their spouses names. Mom lived in home till 2006. Mom is in a nursing home now so Siblings sell her (their) home. The 4 sons get a 1099-S with 25% of the proceeds reported in each of their names. They spent approx $14K in repairs etc prior to selling the house. What is the basis for each son?

Now, to make things better yet. All the proceeds from the sale of her home are put in a bank account in one of the son's (my client) name and SSN. So he is getting a 1099INT for $1750.00 in his SSN. But this account is used to pay mom's medical expenses and nursing home which was approx $42,000.00 in 2007. Does my client get to deduct all these expenses, or only 25% of them since really only 25% of the money used is his. What about the tax liability interest he recieves on this account?

I would love to hear how ya'll would handle this.

I'm sooooooooooooooooooooooooo tired!!!!!!!!!!!!

[ed_accountant]

The basis of this home is Mom's original cost of purchase plus improvements. Since, Mom gifted the house her cost basis goes to the recipients. Original cost basis divided 4 ways....

[RoyDaleOne]

On the other hand, the mom retained a deemed life estate by continuing to live in the house, if she had pass away while living in the house, the house would have been included in her estate tax return. However, I don't recall if the the move to the nursing home would be considered a temporary absence and thereby maybe causing the sale to fall within the Section 121 exclusion.

The brother would be considered a nominee holding his brothers' money. and as such, reports 100% of the interest on Schedule B and and reports the nominee amount it the line provided for same.

[Pacun]

On the other hand, the mom retained a deemed life estate by continuing to live in the house, if she had pass away while living in the house, the house would have been included in her estate tax return. However, I don't recall if the the move to the nursing home would be considered a temporary absence and thereby maybe causing the sale to fall within the Section 121 exclusion.

The brother would be considered a nominee holding his brothers' money. and as such, reports 100% of the interest on Schedule B and and reports the nominee amount it the line provided for same.

Since no one provided more than 50% of mom's support, have son that got the 1099int claim her as a dependent and 25% of the $42 of medical expenses should go to sch A (provided they are using house money to pay for medical expenses).

Basis of the house should be her basis plus improvements. If any of the children lived with her, that child should be able to exclude the gain if he lived there for more than 2 years in the last 5 years prior to sale.

By the way, whose taxes are you preparing? Ask other sibblings to sign form so that your client can claim her exemption.

[OldJack]

I think you need to further check out the facts. On what date did mom gift (by deed without her name) the property to children, if ever, or did the children sell the home for mom with a power of attorney form. Is the proceeds really mom's just deposited in error to the greedy son's bank account or just because he is a dumb holder of a power of attorney form? Go prove the paperwork transactions and don't make a stupid mistake costing your clients taxes.

[RoyDaleOne]

Did Mom may have inherited all or part of the house from her husband?

Maybe stepped up basis for Dad's potion of the home includible in his estate.

I am guessing not because of the lack of good elder care tax planning, but somethimes one never knows.

[Ray in Ohio]

I have a copy of the settlement statement from the title office. It lists all four Sons & their spouses as the sellers. The 1099-S were made out to the four sons for 25% of the selling price each.

I guess the share she "inherited" when her husband died, she would have inherited at FMV. I think I will have to call and see if they can come up with the origianl cost of the home and FMV at the time of her husband's death. And that would be the basis for the sons: 50% of the original cost plus 50% of FMV at Dad's death.

Thanks for helping me out!