Inheritence gone wrong
I was to inherit a piece of property by my Father upon his demise with my Brother. He has changed his mind. We sold the property. There were strings attached to this where if he was still alive he could still sell the property. I will get 1/4 of the selling price of $145000 (Brother gets a 1/4 and Father and his wife get 50%. Roughly I will receive around $30k. How is this reported on the tax form? What category will this be listed as since it is no longer an inheritance but just property sold.
Answers
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Hello Uchatome! Welcome to FreeTaxUSA!
When a property is sold, the basis in the property reduces the taxable gain. Based on the situation you have explained, it sounds like you have no basis in the property.
In this case, the sale proceeds you received would be considered a gift from your father. Since the home was sold before his death, and he maintained ownership, reporting the sale of the property would be his responsibility. As you had no ownership in the property this would not be reported as a sale on your return
If you were given the $30K and you have no responsibility to pay back the amount, this would be considered a gift for tax purposes.The IRS states, "A gift is any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return."
Gifts are taxable if the amount exceeds the annual exclusion. The 2024 the excludable amount is $18,000. Any amount greater than this would be subject to gift tax.
The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.
For additional information on gift taxes, please refer to the IRS website. -
I'm no tax expert but I have heard on a financial podcast that your father could gift you the max ($18,000) and his wife could separately gift you that amount as well. That would more than cover the $30,000 that you expect to receive and would avoid the gift tax. Another option would be for your dad to gift half of it to you this year and then give you a 2nd gift of the other half next year. I hope this helps!
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I will be receiving a 1099 indicating I will have to pay taxes on $30000~. Thank you for the response.
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I will be be picking up a check so there will be no gifting as I can tell.
