Senior residing in AZ selling a non occupied CA home.

[ImaginarySparrow]

My wife and I, 22 years ago provided the down payment etc. funds to allow my seriously ill Senior parents to purchase a CA home. We have been on title since but not on the loan. In 2017 they took their 1/2 interest and placed it into a Trust. My wife and I have divorced and we have a Court order securing our 1/4 interest each. My parents recently have passed away and the home is now in escrow! We both are Elderly and reside in AZ. What can we expect in taxes? Is it better deduct the costs incurred from our share or do we qualify under inheritance clause? 

[NCperson]

@ImaginarySparrow what kind of trust was it? a revocable or irrevocable trust? that would have an impact on whether there is any benefit via inheritance.....

Also, who originally owned this home. You state that your name was on the title, but your parents put their 1/2 interest into a trust.  Are you stating that originally the four of you each owned 1/4 of this property?  can you please explain? 

[ImaginarySparrow]

Irrevocable Trust - CA which I and my Wife are not part of.  Original Purchase 4 of us I believe with right of survivorship prior to the Trust shenanigans' orchestrated by a younger Brother! 

[ImaginarySparrow]

Duplicate??? Sorry....

[NCperson · Accepted solution]

@ImaginarySparrow 

1) the 4 of you originally purchased this property with right of survivorship.

2) then in 2017 their 1/2 interest was placed into a irrevocable trust.  you two are not the beneficiaries of this trust. right?   

3) you two maintained your respective 1/4 interest in this property as your names remained on the deed - and it was NOT in any sort of trust.  right? 

if those are the facts, then you are subject to capital gains tax on your 1/4 interest in the property.  You did not inherit your share via your parents estate; you were the owner from the beginning.  You wouldn't be eligible for any exclusion because you did not live in the property for 2 of the past 5 years.  

your capital gain would the the (sales price less the selling costs) minus (the original purchase price plus the cost of improvements) times 1/4.  Depending on your income the capital gains tax is going to be either 0% or 15% in most cases.  You would also owe income tax to CA and AZ on the sale, but AZ would provide a credit for taxes paid to CA so you are not paying taxes to both states on the same income.  

[ImaginarySparrow]

1. We provided them the money to purchase. We could not be on the loan due to it being an "Age Restricted" Community of which My Ex and I were too young at that time.

2. Correct 2017 they took their 1/2 and put into an Irrevocable Trust with my  Younger Brother as Trustee/Beneficiary.

3.He later tried to take control of the entire property. We took him to Court and were successful in partitioning and have a Judges Order: 1/2 Trust and 1/4 each My Ex and I.