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Which year do I use for basis FMV, 1997 or 2007? Do I have to pay AL taxes?

"I have lived in GA since 1983 and inherited a house from my father in AL. He died in 1997, but his will had a "Life Interest" clause that allowed his second wife to live in it rent free for her use and benefit during her lifetime. After her death, I received the house. He died in 1997, she died in 2007. After her death, I allowed my mother (the first wife) to live there rent free until she needed additional care and attention. After cleaning out the house, I sold it in July 2018. 1. Which year do I use for basis FMV, 1997 or 2007 (One year would be gain, other would be loss)? 2. Do I have to pay AL taxes (assume non-resident taxes)? 3. In what order do I fill out tax forms (AL first, then Federal, then GA?), and 4. will Turbo Tax Deluxe handle this or do I need to upgrade to Premium?"


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Accepted Solutions
MichaelMc
New Member

Which year do I use for basis FMV, 1997 or 2007? Do I have to pay AL taxes?

From the time of your father's death in 1997, you held only a remainderman's interest in the house. That continued throughout the life estate of wife 2. In 2007, upon the death of wife 2, the life estate interest merged with your remainder interest, vesting you with fee simple title. So, your ownership of the house dates to 2007.

Alabama will tax the capital gain, if any, on your 2018 sale of the house, as a non-resident. Georgia will, as your resident state, include this income in your Georgia taxes, as well, but should offer a credit for taxes paid to non-resident states, to ease the burden of double taxation.

The correct order for completion of your tax returns is (1) federal, (2) Alabama, and (3) Georgia.

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1 Reply
MichaelMc
New Member

Which year do I use for basis FMV, 1997 or 2007? Do I have to pay AL taxes?

From the time of your father's death in 1997, you held only a remainderman's interest in the house. That continued throughout the life estate of wife 2. In 2007, upon the death of wife 2, the life estate interest merged with your remainder interest, vesting you with fee simple title. So, your ownership of the house dates to 2007.

Alabama will tax the capital gain, if any, on your 2018 sale of the house, as a non-resident. Georgia will, as your resident state, include this income in your Georgia taxes, as well, but should offer a credit for taxes paid to non-resident states, to ease the burden of double taxation.

The correct order for completion of your tax returns is (1) federal, (2) Alabama, and (3) Georgia.

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