Deeded property. How much tax will I owe?

[jjitalia-hotmail]

I was deeded property a few days before my mom died. When she passed I paid the bills and had to fix up the property to get it to sell. How much do I owe taxes on? She paid 40k for the property. I was deeded half and sold it months later for 144,000.00 but I got 100,000 and my sister got 44,000 due to the split for the grandkids per her wishes. Do I report the difference between 40k and 100k that I received from the sale? And if she left me money in her account that was POD how is that reported?

[AmyC]

1 No with full answer below.

2. POD means the money just passes on to you. There is no reporting the money.

You were deeded the property, perhaps your sister was a beneficiary. The two are treated completely differently. For tax purposes, when you inherit property, you get the value when the person died as the cost basis. When you are given property, you take the cost basis of the person who gave it to you.

This means for you, the cost basis is half of the 40k she paid for the property plus half the cost of any capital improvements. Repairs do not count since that is normal upkeep. Your cost basis is around $20k. You can deduct your half of any commission paid to sell the house.

For the sale, there should have been a 1099-S sent to each owner showing their share of income. If not, you can contact the issuer. If you owned half of the property, you should only have half of the sale as income.  Sale half of $144k or $72k. The fact that any other owners decided to give your kids money above that leads into the gift area.

In 2024, you can gift up to $18,000 per person. I imagine your sister and whoever else are not going over the gifting limits. If so, they will need to file a gift return. It is of no consequence to you.

[jjitalia-hotmail]

Thanks for clearing that up. I was confused because the closing attorney sent two different 1099-s forms. One with the sale split 50/50 to my sister and me, then she requested them to fix it to reflect how the proceeds were distributed out. The sale was in 2023 months after our mom passed and deeded it to us as joint owners. I asked the attorney which one to use and they told me to ask my CPA. They didn't want to touch it.

I am curious as to what constitutes capital improvements on a house. I had to spend a few thousand on repairs to make it sellable, plus the time we went up there to clean out the house, hotel stay, mileage, food, cleaning supplies, exterminators, paying her bills while the house was in the market. I took care of all of that. Is any of that deductible?

[MarilynG1]

Capital Improvements add to the value of the house (Cost Basis).  Things like a new A/C or heating system, windows, pool, fencing, etc.  Repairs are things that need to be done for upkeep; like fix the gutters or repairing a leaky faucet.  Here's more info on Home Improvements. 

Sounds like most of what you did was 'repairs', but you had 'sales expenses' like mileage, hotels, cleaning supplies, exterminators that could be added to the Cost of Sale.  Paying things like utilities or trash had to be done anyway, whether you sold or not, so those don't count.

So if your Basis in the Home was originally 50K and you added 10K in Capital Improvements, now your Basis is 60K.  If your Cost of Sale was 20K, now your Basis is 80K.  If the property sold for 100K, your Capital Gains were 20K.

Capital Gains can be taxed anywhere from 0% to 20%, depending on your Tax Bracket.  Here's more info on How Capital Gains are Taxed.

@jjitalia-hotmail 

[fanfare]

having the house deeded in your name is not good tax wise.

you would have been a lot better off to inherit it through her Will.

maybe you need a new attorney