Cash proceeds from home sale

[villalb]

My questions are how to handle cash proceeds from a home sale.

Actual situation:

• Family home, in the name of sibling C, sold in 2021
• 1/3 of the proceeds paid to sibling B at that time
• 2/3 of the proceeds kept by sibling C to purchase new home (with promise to pay sibling A back when possible)
• In 2022, 1/3 of the proceeds ($85K) paid in cash to sibling A (me)

We are worried about depositing the cash into the bank due to reporting to the IRS. We are also wondering what our tax responsibility is related to this payment.

Thank you!

L

[Mike9241]

Family home, in the name of sibling C, sold in 2021 

see a lawyer. if this was a family home where A, B and c were to be joint owners then A and B should also have been on the title.

if C is the sole owner (only name on the title) it would seem only C has a reporting issue. was a 1099-S issued? if so, whose name(s) were on it

• 1/3 of the proceeds paid to sibling B at that time

if C is the sole owner and gave 1/3 of the proceeds to B without a requirement to repay, then C needs to file a gift tax return if the amount is over $15,000

• 2/3 of the proceeds kept by sibling C to purchase new home (with promise to pay sibling A back when possible)

this becomes a legal issue since you say C was the only one on the title. C may have no legal obligation to give B anything 

• In 2022, 1/3 of the proceeds ($85K) paid in cash to sibling A (me)

if you were not on the title then your situation would be like B. you got a gift 

[rjs]

If you were not an owner of the home, and C gave you $85,000, then as Mike9241 said, it was a gift to you. It doesn't matter where C got the money. You do not pay tax on a gift that you receive, and you do not report it on your tax return. C has to file a gift tax return, but probably will not have to pay any gift tax.

There might me another issue, which we can't help you with. Do you literally mean $85,000 in cash, like a bag of paper money? If so, and the cash is not in a bank, where is it? Keeping that much cash in your home is risky. If it's stolen, burned in a fire, or otherwise lost, under current tax law there is no tax deduction for the loss. If you deposit the cash in a bank account the bank will have to report it. The IRS, or some other government agency, might come around asking questions. We can't help you with that. See a lawyer.

[TomD8]

@villalb --

In your scenario only sibling C has a tax reporting requirement with regard to the home sale.  Sibling C, as the sole legal owner, is solely responsible for any capital gains tax due on the sale of the house.  If the home was Sibling C's primary residence for at least 2 of the 5 years up to the date of sale, he may be eligible for a capital gain tax exclusion.  The fact that Sibling C is using the funds to purchase another home is irrelevant.

Additionally, as previously described, Sibling C may have gift tax reporting requirements (IRS Form 709) for the funds given to Siblings A & B, 

I agree with @rjs and @Mike9241 that a consultation with a tax attorney would be beneficial. 

[villalb]

Yep, cash. As in a bag carried by the Monopoly guy, except without the dollar sign on the outside. Not my preferred situation, but it is what it is.

Thank you for your response!

L

[villalb]

Thank you. You are confirming what I kind of thought. 

I appreciate your response!

L

[villalb]

Thank you for your response. I appreciate it!

L