Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
Your taxes, your way. Get expert help or do it yourself. >> Get started
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

cancel
Showing results for 
Search instead for 
Did you mean: 
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

In September 2014 my mom gifted me her house (valued at about $150,000). She passed away in March 2016. I sold it for about $90,000 in July 2017. She was very ill so I don't think she filed a gift tax. Do I have to file one in her name and with her social security number? She willed me everything else she owned and I have received that judgement in the the mail. BTW, I never lived in it, she built it for herself to retire in, and lived in it until the end even though it was gifted to me.
1 Best answer

Accepted Solutions
Opus 17
Level 15

Do I file my Mom's gift tax and do I file as her?

OK, let's sum up.

1. If your mother was a US person, and gifted you a house that was worth $150,000 at the time of the gift, she was required to file a gift tax return for the year of the gift.  You can do that now; you would write "deceased" and the date across the top and sign in your name with "signing as administrator".  However, no gift tax is owed unless her lifetime total of gifts plus estate was more than $5 million.  So I don't really know if the IRS would care much.  You can run it by the tax advisor you need for the house sale.

2. For the house sale, you owe capital gains tax if the sales price is more than your cost basis; the value on the date of the gift is ignored.

For determining cost basis, it matters how the gift and deed were worded.  There is a concept called "life estate" -- the previous owner retains a right to live in the home, can't be displaced, and remains responsible for taxes, maintenance, etc.  See this http://www.susanmooney.com/?page_id=530

Because you don't really have any rights with a life estate until the life tenant dies, the IRS considers that you inherit the home.  That means you inherit a stepped up cost basis -- your cost basis is the value of the home on the date your mother died.  That means that if you sell it shortly after she dies for roughly the same price as the value on the date she died, you owe no capital gains tax at all.  You might even have a deductible loss -- suppose the fair value on the date she died was $90,000, and you sold it for $90,000, but paid $5,000 in real estate commissions and transfer taxes.  That means you have a capital loss of $5,000 and can deduct that against other income.  If you wanted to claim an even greater loss, I would be very careful to document the fair market value on the date of her death, with a qualified appraisal or other documents.  Remember if you are audited the IRS won't give you any basis you can't prove.

On the other hand, she might have given you the home "in fee simple" -- a straight gift with no strings attached.  In that case, she also gifted you her cost basis -- what she paid to buy the land and build the home (you can't count her own labor she did for free or volunteer/ friend labor, but you count amounts paid to contractors and for supplies.  You have a taxable gain if the selling price is more than the cost basis.  You will need to do your best to document your cost basis because, as said, if audited, the IRS does not have to give you any basis you can't prove.

You may need to see a tax attorney to determine if your deed or gift letter meets the very strict IRS rules to show that it was a life estate entitling you to a stepped up basis.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

18 Replies
VolvoGirl
Level 15

Do I file my Mom's gift tax and do I file as her?

Don't know about if you need to do a gift tax for 2014 for her but probably not.  But when you sold it your cost basis is what she paid for it plus any improvements.  You do not get a step up in value when she died.  So you need to find out what her cost was, what she paid for it.

That's a problem.  Parents think they are doing the right thing by giving the house to the child but it's usually not.  Now your cost basis is what she paid and since you didn't inherit it you don't get the value on date of death.
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

What happens if I cannot get paper proof of what she had spent to build it and add to it over the 8 years she had the house, but only for the original price of the land and for the value of the "gift" as it is written into the legal paperwork. And I have a good guess-timate based on our past conversations. Also, finding these records in the rural areas of Hungary would be next to impossible.
Carl
Level 15

Do I file my Mom's gift tax and do I file as her?

What your mother paid for the house originally will be recorded at the county clerk's office. Usually it's filed with the original deed and construction permits and the such. SO if the recording office doesn't have what you need, the permitting office should.
If that house was at any time a rental, or if a home office was claimed any time during her ownership, then find the tax return with that info on it. It will have what you need for helping you establish the cost basis.
You can also check with the lender who provided the original construction loan and see if you can get the amount of that loan. The amount of that loan along with the appraised value of the land at the time of that loan could then be used to establish an original cost basis. I'm sure the bank required a land appraisal as part of that original loan, and that appraisal will be with the loan paperwork. I would expect the lender to change you a small "research fee" to go dig that information up for you. But you may be able to include those fees in your deductible sales expenses. (Not sure if you can or not really)
Rainman12
Level 10

Do I file my Mom's gift tax and do I file as her?

" ... rural areas of Hungary ..." implies you should consider paying for advice of someone experienced in US/Hungarian tax issues. Can be difficult with Eastern Europe ,,,
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

I already checked in Hungary for the taxes and legalities about this, it is much simpler and taken care of almost automatically. That is why I'm only concerned with the US end of it. I'll try to get ahold of a clerk's office in the village. The bank loan route wouldn't work... She sold her house here in CA and took the cash to Hungary when retiring and building the house on the parcel of land she purchased, all using cash (she always hated owing anything to anybody), she even paid off her 30 year mortgage here in just 22 years. I'm just frustrated about the gifting of the house. She thought it would make my life easier than letting it be inherited. That's why the value of the gift (house) was stipulated in the paperwork.
Opus 17
Level 15

Do I file my Mom's gift tax and do I file as her?

The value of the gift at the time of the gift does not matter for US tax purposes. What matters is the cost that she originally paid, plus the cost of any improvements that she made. If you can't to document this, you will have to estimate on your tax return. But, if you were audited, the IRS will only give you whatever basis you can prove.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

Thank you, this does make perfect sense. Now I'm certain I cannot prove the cost of the house she built in 2007 that she gifted to me in 2014, because in Hungary, these records are only required to be kept for up to 5 years, and she used no loans to build it with. So, even though it was sold for significantly less than what she put into it plus I am forfeiting a tax deduction on the loss, I will be at the mercy of the IRS; it was at least a 40% loss (we calculated this when advertising the home), since it's too far from any major city. This is a misfortune, but what can I do...
Rainman12
Level 10

Do I file my Mom's gift tax and do I file as her?

If you have a loss, then you will have no US taxes to worry about. For personal use homes, losses are not deductible, but gains are taxable. As long as the amount of sale meets or exceeds her basis at gifting, there was no taxable gain.
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

She was in the hospital, most of the time, and I'm sure the last thing on her mind (and mine) was to file a gift tax return in 2015 for the gift in 2014. So, I'm fairly certain, there was never any filed. I did not realize there is such a thing until recently (after the sale of the house). Do I need to file one retroactively now, and do I file it in her name or mine?
Carl
Level 15

Do I file my Mom's gift tax and do I file as her?

@Rainman12 "As long as the amount of sale meets or exceeds her basis at gifting, there was no taxable gain."
You're backwards. Please delete my comment after correcting yours. 🙂
Opus 17
Level 15

Do I file my Mom's gift tax and do I file as her?

@sandorbatyi was your mother a United States person for tax purposes in the year that she made the gift? If she was a United States person  (a citizen or resident alien) then she would need to file a gift tax return to report the gift of the house. And you could do that now as the administrator of her estate.   But if she was not a US person, then she would have no obligation to report a gift to the IRS.  

Is there property tax in Hungary and is it calculated on the value of the property? If so, the tax records in 2007 or 2008  might be a good estimate of the value when new.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

Yes she was a US citizen. She had no tax obligations for the home in Hungary. She paid no taxes on her social security to US either... it was the only income she had. The home was paid in full from the retirement money she moved back there with. The home was the only thing "gifted" to me while she continued to live in it until the very end. Home was valued at $150K and her staying in the home while it was in my name were both specified in the gifting papers.
Opus 17
Level 15

Do I file my Mom's gift tax and do I file as her?

Was there a deed filed with the court, or whoever records property deeds in Hungary? Do you have a way of getting a copy of the deed?  

In the US, certain deed forms when  a home is transferred to a child but the parent retains the right to live in the home have special tax treatment when the parent passes away, which may affect the taxability of the sale. It would be very helpful if you had a copy of the deed.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
sandorbatyi
Level 3

Do I file my Mom's gift tax and do I file as her?

Yes, that is what I've been calling the gift paper. In Hungary it's just one paper done by an attorney and filed by her. It states that my mom will continue to live in the home until her passing, but its ownership is transferred to me immediately. It also states the value of the property that she is giving to me (approximately $135,000 at today's currency rates).

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.49m
Members

2.62m
Discussions

Manage cookies
v