Is this payment check be OK for 2022 tax filing?

[tuanngnttax]

I have sold my second house and I nominee the money to my sisters and brothers.  I will provide a 1099-S form to each of them.  For one sister, I have to write a check for her in early January 2023 because she is on vacation in Phillipean right now and will be back in January. I will also provide her with the form 1099-S for filing tax for 2022.  Is this OK since the check will be cashed in January 2023?

[Anonymous_ · Accepted solution]

You can nominee the proceeds to your sisters and brothers but are the shares of the proceeds rightfully their shares? 

Did they each have an ownership (or other) interest in the property?

[tuanngnttax]

Your question is very interesting.  My name was only on the deed; but I nominee the money to my brothers and sisters. One sister used her daughter's name to get that money and one brother used his wife name to get the money.  Is this legal?  What proof that I need to provide rightfully?

[Anonymous_ · Accepted solution]

You can gift them part of the proceeds, of course, but not your income tax liability.

[tuanngnttax]

I have a question. on the 1099s form, there is a check box question, "Check here if the transferor received or will
receive property or services as part of the consideration".  What does this question really mean?

[Anonymous_]

See https://www.irs.gov/instructions/i1099s#en_US_202201_publink1000280448

[Carl]

State laws may negate my response below, for all I know. But here it is.

My name was only on the deed

Based in the information provided in this thread thus far, you alone are liable for 100% of any taxes due on the proceeds. Giving some of those proceeds to other family members doesn't change that. It's considered a gift from you to the family member and you (not the recipient) pays any taxes due on it.

On top of that, if you gift any one individual more than $16K in 2022 ($17K in 2023) then you the giver are required to report the transaction to the IRS on IRS Form 709 - Gift Tax Return. Now you will not pay any additional tax on the gift since it would most likely be well below the lifetime limit, which is something around $11.2M. (Can't recall exact number here.)  But you are still required to report it.

The recipient is not required to report anything concerning the gift on their own tax return.

The IRS Form 709 is not filed with your normal tax return. It's completed as a physically separate document and mailed as such to the address identified in the Form 709 instructions. Again, no additional taxes are paid, since you the giver paid tax normal taxes on the income or gain already. It's just a reporting requirement.

[tuanngnttax]

OH my God!  Jesus Christ.  No, I sold my house for $185k and I have to give money to my brothers and sisters for their shares because that is what my father wanted.  This house was gifted to me by one brother 20 years ago.  4 people that I have to share $185k; so you are telling me that this is very risky that the IRS might deny later on and I will be responsible for 100% tax.

[tuanngnttax]

What proof that the IRS required for the followings:

- the shares of the proceeds rightfully their shares? 

- Did they each have an ownership (or other) interest in the property?

[Anonymous_]

The scenario you described is a bit odd, @tuanngnttax; your father wanted you to share the proceeds from the sale (or share the house and proceeds), but it was your brother who gifted you the house.

Regardless, if you used the house as your main home for two out of the last five years leading up to the closing (and clearly you owned it for that period of time), you can report the sale on your return and exclude the entire gain on the $185k sale.

See https://www.irs.gov/taxtopics/tc701

[tuanngnttax]

Here is again, this was my second home, not my main home. 20 years ago, my brother gifted this house to me and my father lived in this house since then. This year he died in January; so I have to sell it. My family planned that after selling the house, the money will be split between 5 people including me (the owner).  I can't claim this one as my main home because I didn't qualify for that.. Someone here told me t3 months ago that I can do nominee the gross proceeds to 4 people. 

[tuanngnttax]

I can answer these two questions below, but what proof that I need to prove to IRS if an audit occurs:

You can nominee the proceeds to your sisters and brothers but are the shares of the proceeds rightfully their shares? Yes

Did they each have an ownership (or other) interest in the property? Yes

[Anonymous_]

Who (which parties) were (are) on title?

How was title being held (e.g., as joint tenants, tenants in common)? 

Did your father leave a will?

[tuanngnttax]

I believe you didn't understand the whole story here. You gave me a heart attack.  Your answer about nominee is 360 degree opposite to what I got from here 3 months ago.  I will not commit tax fraud.  I sold my house and my name is on the deed only and I have to distribute the money to my brother and sister.  Of course my brother and sister will pay tax on their shares.  You didn't understand my original question in detail.  

[Anonymous_]

Again, you can nominee out their share of the proceeds (on which they will be liable for any tax due) if their shares of the proceeds rightfully belong to them.