AboutGlenn D Schnabel Expertise I can answer most federal individual income tax questions.
I can not provide legal advise.
Experience I have worked for a CPA firm for over 11 years.
I have worked in private as well as government
I have recently been running a tax preparation office, mainly focusing on
individual income taxes
Organizations I have been affiliated with managing condo associations and as a member of a coalition to educate condo owners as to their rights and responsibilities.
Education/Credentials I have my B.S.B.A in Business Administration . Concentration in Accounting
I have gone to yearly tax seminars and have tried to keep up with the
evolving tax changes
Awards and Honors Over my years I have received local awards for contributions to worthy
organizations.
Past/Present Clients This, of course remains confidential
Question QUESTION: my sisters and I just sold my mom's house, she went into a nursing home. She signed the house over to us 3 girls around 20 years ago. Now we just sold it, gave some money from my mom's part (she had lifetime living rights to the house) to medicaid and split the rest 3 ways. My question is are we allowed to deduct all the improvements that were made on the house for the 60 yrs my mom lived there off of our profit? I have been told yes, even though we were on the dead for the 20 yrs that we can still take the deduction. Is this right? WE have no papers on what was done, they didn't keep that stuff. My sister was told that deducting around $60,000 for the 60 years was reasonable and we could split that 3 ways, therefore $20,000 off the amount we each made. Thanks, Debbie
ANSWER: Debbie,
I would suggest that you document a chronology of what was done in the house which is deemed improvements. Ordinary repairs would not qualify,
As a general rule, people can easy spend $60,000 over the lifetime.
I would not necessarily use $1,000 a year for 60 years. I would set up estimates for the work done. If questioned, you would have to provide documentation
---------- FOLLOW-UP ----------
QUESTION: so you are saying that we can deduct for things done to the house even before we were put on the deed?
Since most of the improvements, such as closing in a farmers porch into a closed room, new windows, roof, bathroom & kitchen plus more things like a room down in the cellar improvements were done over 20 yrs ago and there are no papers to prove it, would we still be able to claim it? My mom has alziemers and we can't ask her.
One tax lady said yes and we could just claim it and since it is reasonable amount we don't need to show it, also we can take off for part of the closing fees. My husband doesn't feel comfortable with this. He thinks we should just pay the taxes for the whole amount.
Also we were told we should pay some tax upfront, so we did make a estimated pre-payment.
Thanks for your help!
Answer When your mom deeded the house over to you, she , in effect, transfers
her cost basis over to you and your other sisters.
I would document the costs of the work done.
Closing in a farmers porch into a closed room
New windows
Roof
Bathroom
Kitchen
Adding a room down in the cellar
Also add the commission and other closing costs on the sale of the house.
I would list the date done and an estimate of the cost to get it done.
Once you figure out the Gain on the sale of the house, then each participant should pay an estimated tax payment to cover their share of
the gain. Figure at least 15-20% plus the state portion in estimated taxes. Federal would be done using form 1040-ES and the respective state estimate. Each sister would report their share and pay their tax.
Generally a partnership was formed (IRS form 1065) and the gain should be split up and K-1's should be issued at the end of the year and this way each partner reports their share of the gain.
