Recently my mother-in-law who is 87 years old sold her primary residence and gave 1/3 of the proceeds to my wife and myself. Is this considered an inheritance and what are the tax consequences for both my mother-in law and myself.
Divorce / Separation Lawyer
It's not an inheritance, because she's alive.
Your mother MAY need to file a federal gift tax return. She can give $14,000 per person ($28,000 if she gave two SEPARATE gifts, one to you and one to your wife) or after January 1, 2013 with no return needed. (The figure was $13,000 if this happened in 2012).
Unless the gifts were very large even if a return is needed there may not be a tax. Consult your CPA if the per person gift exceeded the amount listed.
If you find this answer helpful, please mark it here on AVVO as helpful. In answering you, I am attempting to communicate general legal information and am not representing you (and am not your lawyer). Do feel free to call me at 404-768-3509 if you wish to discuss actual representation (the phone call also does not retain counsel; that requires an office visit and appropriate paperwork). In that a forum such as this provides me with limited details and doesn't allow me to review details and documents, it is possible that answers here, while meant to be helpful, may in some cases not be complete or accurate, and I highly recommend that you retain legal counsel rather than rely on the answers here. (You can also email my office at firstname.lastname@example.org . An email also does not retain my office, but can help you get an appointment set if you prefer not to call). I am happy to discuss possible representation with you. Any information in this communication is for discussion purposes only, and is not offered as legal advice. There is no right to rely on the information contained in this communication and no attorney-client relationship is formed. Nothing in my answer should be considered as tax-advice. To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. I am also required to advise you, if your question concerns bankruptcy, that the U.S. Congress has designated Ashman Law Office as a debt relief agency that can help people file bankruptcy.
Family Law Attorney
It's not inheritance if the person is still alive. Consult a CPA to determine the most advantageous tax treatment at this point. Doing so BEFORE she gave you the proceeds would have been a good idea.
If you have further questions, call me at 770-904-5115. The information and opinion rendered herein is done as a courtesy and is for general informational purposes. Nothing herein may be construed by any party as to give rise to an attorney-client relationship.
Family Law Attorney
I agree with attorney Ashman. You receive an inheritance after someone dies. What you received is a gift, subject to gift tax by the donor (your mother-in-law) for amounts in excess of the yearly exemption.
Please note that I am answering this question as a service through Avvo but not as your attorney and no attorney-client relationship is established by this posting. An attorney-client relationship can only be established through signing a Fee Agreement and paying the necessary advanced fees.
IF a federal gift tax is payable, it is the DONOR who is liable for it, not the recipient of the gift.
In addition to the possible need to file a gift tax return, if your mother-in-law sold her house for more than a $250,000 gain, she will owe income tax on the excess of the proceeds over that amount.
This is a gift not an inheritance. Any federal gift tax is an issue for the donor (your mother). Georgia does not have a gift tax. Gift tax would only apply if the amount exceeded lifetime total of 5.25M. If your mother gifted more than 14K to anyone individual, she would have to file a gift tax return (Form 709) when filing her income tax return. Failure to file penalties are based on the tax due, so if her total gifts over her life are less than $5.25M then no penalties or tax even if the return is filed late.
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.