my mother died, we sold her house, and received 48,667.46 (cash to seller). me and my sister both received a check for $24,333.73. do i pay tax on it? I read the thing on the FMV, fair market value.. but i don't understand it??? you would think the fair market value should have been at least 75,000, that is what we were asking for it originally, but gave up getting it, and finally ended up for selling it for way less $54,000. Do I have to pay taxes on that $24,333.73?"
When you report the sale of the property, your cost basis will be the FMV of the property at the time it was deeded to you. If you sold at a gain, you will pay taxes on the gain only. However, your initial acquisition of the property will raise flags at the IRS sooner or later. When it does (note I said "when" not "if") then the IRS can do what is called "clawback" where they can take back in to your mother's estate, from those that acquired it, whatever amount is necessary to pay the gift taxes, along with all the fines and penalties. So I urge you - consult with a CPA this year that you can hold legally liable and financially culpable for the advice and assistance they give you. You DO NOT have that protection in this public user-to-user form.
Also, others are going to see this thread and throw in their two cents. Follow their advice (including mine) AT YOUR OWN RISK AND PERIL!
The cost basis would only be FMV at transfer if i that value is less then the cost basis of the owner.Otherwise it would be her cost basis. If it was owned by both your parents she might have received a step up in the basis when she became sole owner.
There should have been a gift tax informational form done in the year of the gift but if the estate of the owner at time of death was under estate tax limits(over 5million indexed for inflation) there will not be an estate tax.
If the home was transferred but left your mother with a life estate where she lived in home until her death then your cost basis might be the value at the time of her death.
You need more information. You should get the HUD statement for the sale and you should have an idea of the fair market value at the time of your mother's death. That plus your closing costs are your basis.
If it was sold while still in your mother's name you should have received a K-1 not a 1099-S
Then, if you sell the property for more than that FMV on the date the original owner passed, you will pay taxes on the difference.
If you received a 1099-S for the sale, then it doesn't matter if you sold at a gain or a loss. You *must* report the sale on your tax return. You don't have a choice.