Filing taxes on inherited property (out of state) that was sold in a bankruptcy

[GodChoseMe]

I shared ownership of a home inherited with 4 other siblings when our mother passed away in 2007. Unfortunately, one of the siblings filed bankruptcy about 5 years ago and listed the property as an asset in his bankruptcy filing. Ultimately, it was turned over to the trustee in his bankruptcy case and they sold it as the remaining siblings could not afford to cover his debts in cash without it being sold. Of course, the remaining amount after fees was disbursed to the rest of us.

The house is in New York - New York City to be exact but I live in Georgia. I am wondering if there is a version of TurboTax that can help me properly address all of these filing concerns:

1) Do I owe taxes to New York City and / or New York State from the proceeds and filing those taxes for this situation?

2) I assume I owe taxes to the state of Georgia since it is considered income. The question is how much as the property was in our possession from 2007 until this year.

3) Regarding the IRS, I read about a 'Stepped-Up' tax situation where I would be taxed on the difference between the value of the home at the time of our mother's passing (in the process of getting property assessment docs from 2007 showing the value of the home) and the selling price divided by the number of siblings. Is "stepped-up" taxation also available for the state taxes (possibly NYC taxes as well) and will TurboTax be able to work this out?

4) I also donated 10% of my proceeds from this transaction as tithes to a church. 

I have been using TurboTax for years and it is an easy filing. However, with this pretty remarkable change in income increase this year, I am not sure if there is a TurboTax version that can handle this or if I need a tax preparer or CPA familiar with real estate sales such as this one.

Thanks in advance.

[tagteam · Accepted solution]

You might want to contact a tax professional for this tax year due to the multi-state issue.

See https://taxexperts.naea.org/expertdirectory

Although you will not have any tax liability to New York City due to your being a nonresident of the City, you will almost certainly have tax liability to New York State since you have New York State source income.

You most likely will get a credit on your Georgia tax return for the amount of tax you are required to pay to the state of New York.

[Critter-3]

1) Do I owe taxes to New York City and / or New York State from the proceeds and filing those taxes for this situation?   Yes you do to both.  There may be taxes withheld at the time of the sale which is usual.

2) I assume I owe taxes to the state of Georgia since it is considered income. The question is how much as the property was in our possession from 2007 until this year.  Yes again but you will get credit for the NY taxes paid ... complete the non resident NY return first in the TT system for this to work properly.

3) Regarding the IRS, I read about a 'Stepped-Up' tax situation where I would be taxed on the difference between the value of the home at the time of our mother's passing (in the process of getting property assessment docs from 2007 showing the value of the home) and the selling price divided by the number of siblings. Is "stepped-up" taxation also available for the state taxes (possibly NYC taxes as well) and will TurboTax be able to work this out?   Yes, the basis should be stepped up to the fair market value as of the DOD.

4) I also donated 10% of my proceeds from this transaction as tithes to a church.  Immaterial to the reporting of the sale.   If you itemize deductions then the charitable deduction may be used.

I have been using TurboTax for years and it is an easy filing. However, with this pretty remarkable change in income increase this year, I am not sure if there is a TurboTax version that can handle this or if I need a tax preparer or CPA familiar with real estate sales such as this one.   The TT program can handle all of this if you want to do it yourself ... you can use any of the downloaded versions but if you use the online program you will need use the Premier or better.   

[tagteam]

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@Critter-3 wrote:

1) Do I owe taxes to New York City and / or New York State from the proceeds and filing those taxes for this situation?   Yes you do to both.  There may be taxes withheld at the time of the sale which is usual.

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See https://www.tax.ny.gov/pit/file/nonresident-faqs.htm

All city residents’ income, no matter where it is earned, is subject to New York City personal income tax. Nonresidents of New York City are not liable for New York City personal income tax.