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gecko2420
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Sharing proceeds of house acquired with Beneficiary Deed

My mother passed away and left her house to me with a beneficiary deed. I am preparing to sell the house and would like to share the proceeds with my mom's sister, who received nothing from the estate because my mother did not have a will/estate plan. I want to know how I can do this so the sister does not have to pay tax on the money, which will be about $200K. I am an only child and everything is amicable; I live in MO, the sister in KS. 

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2 Replies

Sharing proceeds of house acquired with Beneficiary Deed

Once the house is sold you can gift her the $200,000.  A gift received is not taxable or reported on a tax return, regardless of the amount received.

 

You, as the giver of the gift, have to report the gift given since it is over the annual exclusion amount of $18,000 (2024).  You report the gift given using IRS Form 709.  TurboTax does not support form 709.  The form is mailed to the IRS separate from your tax return to the IRS address shown in the Form 709 instructions.  There will not be any gift taxes owed if your total of all gifts ever given in less than $13.61 million (2024).

 

Go to this IRS website for the Form 709 (2023) - https://www.irs.gov/forms-pubs/about-form-709

Sharing proceeds of house acquired with Beneficiary Deed

sorry for your loss. you get a step-up in basis to the property's fair market value on the date of death which means there would likely be little gain maybe even a loss when sales costs are included.  Since you are the only beneficiary you have two options

1) you sell the property and then pay all the tax on the gain, if any. You gift the sister whatever you want. It would be tax-free to her and you but since it'll be over the annual gift tax exclusion of $18,000 for 2024, you should file a gift tax return (Form 709). There would likely be no gift tax but you would use up about $182,000  of your lifetime estate exclusion which for 2024 is $13.61 million. This exclusion grows every year so if it were $24.182 million in the year you died, your estate would need to be over $24 Million before there were estate taxes. State laws vary as to estate and inheritance taxes and exemptions. 

2) the other option is to gift her 1/2 your interest in the property before the sale  - make sure she'll agree to the sale. She would get 1/2 your basis and. She would report her share of the sale and pay taxes on her share of the gain, if any. You would have to file a gift tax return. In this case, the gift value is 1/2 the Fair Market value on the date you make the gift.

 

the best option, solely from an economic standpoint,  is the one that produces the lowest amount of income taxes for both of you that is attributable to the sale. 

 

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