I started working on my Mom’s taxes for 2016. She sold her home last year(2016), which my Mom and Dad bought back in 1961. Very large gain from the sale of the house. My Dad died back in 1993. I’m using turbo-tax and I get to the section under house sale “additional exclusion for widow”. It says “you may be able to exclude more gain of the sale of your house if your spouse passed away within two years before you sold your home”. My question is what if your spouse died back in 1993 should’t there be away to calculate the additional exclusion for the 32 years my Dad lived in the house? When the house sold back in September I consulted with a lawyer about this and he said it can be done but seems like turbo-tax does not allow anything except within a two year period on the sale of the home and I really don’t want to go back and pay big fees to the lawyer for doing the taxes.
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Your dad's half gets a 'step up' in value for his 50% ownership on the date of his death. It is best explained by example.
Let's say the original cost of the house was $100,000, and the Fair Market Value on the date of his death in 1993 was $300,000.
That means your mom's original cost for her half was $50,000, and so was your dad's.
When your dad died, his half ($50,000) is increased to 50% of the Fair Market Value.($150,000).
So the total 'cost' of the house is this:
Your dad's half gets a 'step up' in value for his 50% ownership on the date of his death. It is best explained by example.
Let's say the original cost of the house was $100,000, and the Fair Market Value on the date of his death in 1993 was $300,000.
That means your mom's original cost for her half was $50,000, and so was your dad's.
When your dad died, his half ($50,000) is increased to 50% of the Fair Market Value.($150,000).
So the total 'cost' of the house is this:
It's my understanding that (in CA) if you hold the title as joint tenants with right of survivorship the stepped-up basis is not subject to the 50% rule. However, I am entitled to a $250,000 exclusion on top of the basis but I can't find where to enter it. The program is telling me that I am not eligible for the exclusion. And when I went to the forms I found all the questions were filled out wrong. I fixed them but I still can't figure out why I don't get the $250K that I am entitled to.
Did you live at least 2 of the last 5 years in the home?
The requirements are determined by the answers you give during the interview.
Have you taken the exclusion on another house within the last 2 years?
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