gave me my share of the estimated value of the property, $50,000. He wanted to keep the home, and I did not care, so he basically bought me out. This money represents my inheritance, is it taxable?
Family Law Attorney
Yes the money is taxable. But the larger question is how did you inherit the estate? If there was no Trust, then the estate had to be probated and neither you nor your brother had any legal authority to conduct the affairs of her estate. If it was in a trust, then you had a right to receive a full accounting of the trust.
No, this would not be taxable, at least, not to you. Your brother should file a gift tax return. It should not be taxable to him, either, but he should still file the return. You are lucky to have a brother who is more interested in you than in the money. MANY people would have told you that you were out of luck. We see those kinds of fact situations on Avvo every day.
***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!
This is a little complicated because you need to figure out the basis of the property. If your mom retained possession notwithstanding the deed, the property would be part of her taxable estate and entitled to a step up in basis. If the gift was complete and your mom did not retain ownership of the property then, there is a carryover basis in the property.
As to the transaction between you and your brother, there are several ways to look at that. 1) He bought out your claim to your share or 2) he gave you a gift essentially out of guilt. QUESTION - did your mother intend to gift the house to your brother or was it given to him for convenience and intended for both of you.
Again, the answer to your question, in my opinion, will turn on 1 or 2 above and what the basis in the property was.
I am sorry that I cannot get you closer to an answer but I do not give tax opinions to non-clients. In addition, the IRS will not accept reliance on a statement on these boards if they take issue with your manner of reporting.
That said, I dont see the $50,000 as being income, but there could be capital gains issues.
The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.
Real Estate Attorney
It's an unusual situation. Was his deed ever filed? If so, he basically made a $50K gift to you which shouldn't be taxable, but he should file a gift tax return. If the will was probated, you each received a share, then the house would be inherited at a stepped-up basis. Assuming the $50K was at or below market at the time of death, then again no taxes.