I wonder about the best thing to do, coming up. It's a nice problem to have.
I will get one-seventh of the proceeds from the sale of the house my wife and I are in, soon--- whenever it sells. (We may be geographically elsewhere, by the time it sells, in our new location.) My parents had 7 kids. That's why we'll get one-seventh. Before my father died, we were all listed as co-owners on the deed, with my still extant mom, at 89 years old. We never bought it. My parents did. My siblings all moved out long ago. My wife and I came back to the house after I retired. We've now been in it, paying taxes and utilities since 2012. ...After reading-up on this stuff, I've discovered we ought not to be getting a 1099-S from the realtor. But OUGHT NOT and what may happen are two different things. Wifey and I have never ever bought a home anywhere before, either together or separately. And as I say, we did not buy THIS one, either. But the requirements for this to be an eligible non-taxable house-sale are covered, in terms of length of occupancy. ...So, what do I do when I get the unwelcome 1099-S? By the way, the house is being sold at a depressed price. It's not in good shape, and built in 1922. It's not worth it to any of us to fix it up.
We have to arrange and accommodate visits from prospective home buyers. But my brother, the banker, is dealing directly with the realtor.
There is also the matter of $5,000 in non-deductible, non-taxable money in my Trad. IRA. We have a good tax guy, and trust him. He has advised taking it out in 3 tranches: $2K, then 2K again, then 1K in the third year, to avoid a tax-hit. But that was before the decision to get out of my hometown, because it's become a toilet-city. And the zookeepers can't keep the animals in check. Anyhow, the way the IRS has designed the method for actually taking out my non-taxable 5K is a convoluted pile of giraffe shit, lemme tell ya. I've been in touch with our tax guy. He tactfully, politely offered to do our taxes for 2019--- but demurred, going forward. We'll have partial-year returns for MA and HI for 2019, besides the federal return. I think now that I want to take the full $5,000 in one slug. But as I hinted, it's not as simple as just pulling 5K from my IRA. Mr. Tax Guy explained it once, but I don't have enough bread crumbs to make my way back home from there. So, how much DO I need to take out before I get the $5K I've actually got coming, which is non-taxable? The full total of what's in my Trad. IRA enters into it, I know. Right now, it's down a bit, just in the last couple of days, because uncle Donald is an asshole. The big reason I'm tempted to take it all at once is because "our guy" is familiar with this, and filled out the tax records himself. Anyone else would just not take our word for the fact that this 5k is non-taxable, either. And I'm not taking any more than 3 years' worth of tax returns with us. Paper is HEAVY. There's UPS and FedEx, yes. But our MASSACHUSETTS tax guy keeps records, too. (For how long?)
Wifey stops work in mid-October here. So her customary income from Oct. 11 through December 31 just won't be there. That may be a back-handed blessing. As for me, there's just SS and private pension, about $725 monthly, these days. And the Medicare payment is being deducted from SS, now. So monthly SS is down to about $1,135.00.
Rent in HI will be high, but shared with relatives. Water and electric are included. I suppose I should get a monthly receipt from SOMEONE, in case HI offers any kind of tax break for housing costs for seniors. A 2-year bus pass is just $70. And I can bum a ride from family anytime, too.
Anyone have some armchair advise for me? What to expect in ways I can't see yet? Thanks.
Comments
Good luck.. I am no cpa but sounds like you need little but if help... Did you try punching /testing numbers yourself w previous turbo tax 2018 or 2017?
- prior to father's death, nine co-owners (equal shares?) with right of survivorship(?)
- their basis was 1/9 of the purchase price, plus improvements, less acquisition costs
(on a gift, you get both the share of the property and the share of the cost basis)
- father dies, eight survivors inherit father's 1/9th, with step up in basis on inherited portion only
- mother dies, seven survivors inherit mother's 1/8th, with step up in basis on inherited portion
- you and spouse live in house as main residence since 2012 (satisfying 2 out of last 5 years rule)
- house is sold
Is that about right?
Each sibling would have a gain equal to their 1/7 share of proceeds (less selling expenses) minus their basis as described above. Depressed price or not, it could still be worth more than your parents originally paid for the place since that was so many years ago.
Since you and spouse used it as principal residence, you will get to exclude $500K from your gain, but I believe you still report the sale on your tax return. Siblings would not get an exclusion (they did not use home as principal residence for 2 out of the past 5 years).
I believe you'll also have to declare the sale on your Mass. tax return, regardless of your state of residence, because the sale is of real property in Mass. It won't matter much since you won't have a taxable gain, and you should check to see for sure which state(s) require that you declare the sale.
I don't believe it matters whether you get a 1099-S. Just work off the HUD-1 closing statement.
On the IRA, it sounds like $5K out of a larger balance was contributed post-tax (no deduction taken). Distributions from IRAs are handled pro-rata. So if you take out half of the IRA, then $2.5K of that distribution is post-tax. In order to take out the full $5K post-tax portion, you have to take out everything from your T-IRA.
Note that if you have multiple T-IRAs, they are all added together. So if you have $50K in one T-IRA, of which $5K is pre-tax, and you have $50K in another T-IRA (all pre-tax), then closing out the first T-IRA counts as taking out half your money from IRAs. Even though the post-tax part was all in that first IRA.
Needless to say, this is just informational, not intended as advice, YMMV, not to be relied upon, void where prohibited by law, ...