I saved my mother in laws home removed from reverse mortgage by refinancing with Mother in law and I on new loan.

[Monty python]

Question is or seeking advice. on how to do deductions on taxes. Let me first give a quick summary of details and current updates. Please bare with me, this is a sad story of family has forsaken.

• My in laws owned their home free and clear.
• the home was part of a revocable trust implemented by my father in law, in short that both siblings, my wife and her brother, would get 50/50 upon passing of both parents. or father passed first, mother is new trustee, mother passed brother was named new temporary trustee.
• After father passed. My Wife's Brother takes advantage of situation and puts home in reverse mortgage. without consulting my Wife, a named beneficiary in the living trust. So to me whats to accumulate is the start of her loss in deductions. but more of that later.
• Mother requiring more living assistance. and is provided by a part time live in  hired care provider. but not a certified  provider.
• Brother asks to meet Wife and I after two years and says Mom needs to go into state convalescent home of we need to care for her ourselves. Stating funds depleted to pay part time live in care.
• Father left mother 85,000 in bank upon passing. gone. and house was now 300,000 in dept from reverse mortgage. And paper trail that shows 90% of the 300,000 borrowed was squandered by brother.
• I immediately consulted a real estate friend. I refinanced the home with mother in law and I on deed.  because i was only one the could qualify with my income. or else she would lose home and property. 
• soon after I refinanced again to barrow 20,000 for very much needed repair and renovations to home.
• Mother in law passed four months ago, May she rest in peace,

Now which forms do I start using and are there any obvious or specific deduction I can claim? 

[Carl]

There's only two things that can be claimed on a tax return for this. Mortgage interest reported to the primary borrower on the loan on a 1098-Mortgage Interest Statement, and property taxes. That's it.

To claim both or either, two criteria must be met.

1) You must be legally obligated to pay it.

2) You must have actually paid it.

So regardless of whose name/SSN is on 1098 or property tax bill, if you meet both criteria above you can claim those two items.

Both property taxes and Mortgage interest are a SCH A deduction that will have no impact what-so-ever on your tax liability until the total of all SCH A deductions exceeds your standard deduction.

[xmasbaby0]

"I immediately consulted a real estate friend."

Please seek the advice of an attorney for your much deeper problem--it seems your spouse's brother squandered your wife's potential inheritance.  You need a lot more advice than we can provide in this user forum.

[tagteam]

I agree with @xmasbaby0; get competent legal counsel immediately. In addition to the issue stated by @xmasbaby0, you were also added to the deed with your mother-in-law which could potentially present an entirely different issue. Seek legal advice for this matter.

[Opus 17 · Accepted solution]

For 2019, you can deduct the mortgage interest and property taxes that you paid, because you are on the mortgage and the deed, as @Carl says.

For 2020, you may have a taxable gain to report when you sell the home.  This is going to be complicated and will probably require legal assistance.  I assume that you broke or dissolved the trust so that the house could be put in your and your mother's name again instead of in the name of the trust.  The form of that deed will be very important to you.  It could be that you were gifted half the house, and inherited the other half when your mother passed in 2020, or it could be that you inherited the entire house in 2020.  The tax results are going to be very different for you.  

Basically, if your mother had a life estate, that means that even though you were joint owners, you could not sell your half as long as your mother was alive.  That means you really didn't own anything of value until she died.  The IRS treats that as an inheritance, and you receive a stepped up basis that means that when you sell, you won't owe capital gains tax (or very little).  However, if you were joint tenants in common with no life estate, so that you could have sold your half-share of the home without restrictions, then your mother gave you half the home when you were added to the deed, and you inherited the other half.  That means you will probably owe capital gains tax when you sell the home.

Rather than diagram all the different scenarios, get the deed to an attorney or tax specialist in your state and find out what your ownership status was, then we can talk some more. 

[Monty python]

Thank you for taking time from your day to read and respond. I will put your sincere  input and execute. 

Have an excellent and productive day.

Monty 

[Monty python]

I know your absolutely correct on your reply. I appreciate everyone that reads and replies. Hindsight, my post feels a little more therapeutic for me expressing  my feelings and dilemma really did help me. I would say I can see a little bit more clearly and focus on what my objectives are. To all have an excellent and productive week.

Sincerely, Monty

[Monty python]

Yes, yes this is true in regards to my now being on deed. 

Its a shame because. No more than two weeks of my mother in laws passing, her son came caring his Trump Card Stating he was now the temporary trustee and would be executing his right to sell house and get his share. I calmly stared him in the Face and said "Well do you feel lucky punk? WELL DO YOU?" I told him he was so Derick in his malevolence, that he left a paper trial to all his dirty deeds and I could not recover what he has stolen then he himself would most likely pay the  penance  when the devil comes a knock en. 

There i go again jabbering on for therapy.  I am focused and head your insight.. 

To all...Have an excellent and productive week. 

Sincerely Forgiving, Monty

[Monty python]

I have two words for you Sir !!

Your Awesome. 

You have spoken.  I have come to understand. There will be a day when we converse again for fallow up.

Again, to all have an excellent and productive week. 

Sincerely schooled, Monty

P.S. Can I call you The Wise Wizard of Turbo. Just kidding.....well...if you like it, yes?

[tagteam]

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@Monty python wrote:

...No more than two weeks of my mother in laws passing, her son came caring his Trump Card Stating he was now the temporary trustee and would be executing his right to sell house and get his share.

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Based upon the facts you set forth, that is precisely why you need legal counsel. Good luck.

[Opus 17]

The trustee’s actions may have been immoral and against the family wishes in setting up the trust, but they may not have been illegal.  The trustee has a considerable amount of power, and when my parents set up an asset protection trust and named me as the trustee, the attorneys warned them that I would have a lot of power and this is something they should only do if they had absolute trust in me.

this forum really isn’t equipped to deal with this kind of problem and we should really just stick to the tax issues.

[tagteam]

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@Opus 17 wrote:

this forum really isn’t equipped to deal with this kind of problem and we should really just stick to the tax issues.

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My one and only suggestion was for the OP to consult with an attorney. Re the tax issues, many of the statements in your (now recommended) post are simply not accurate and/or based on clearly erronerous assumptions; in fact, it appears as if you do not understand what occurred at the inception of this trust, the parties as they were then and are now currently, and the legal implications thereof.

You may not be equipped to deal with this kind of problem, assuming you are not an attorney, but I have been dealing with issues of this nature for over 35 years. Having so stated, I agree that this forum is not equipped to deal with this type of issue, hence my suggestion that the OP secure legal counsel.