Expert: Gerard L. Samoleski, CPA* - 8/8/2007

Question
Parents thought they were doing something good. they put the 4 kids name on the deed of their house. The house has finaly sold with after closing and mortgage payoff a result of $32,000 total.  What if any are the tax obligations for all of us.  The house sold in Indiana. One sibling is in IN, one in TX, One in MS and I am in MI.  Thanks for any light you can shed on this.

Answer
Pennie:

I will preface this answer with the fact that I am a CPA in Florida and am unfamiliar with the specific state tax laws that you specified.

In general, if Indiana has a state income tax, the gain on teh sale would be reported, in part, by all the owners by filing a nonresident income tax return (except for the Indiana resident).  The non residents will only have to pay tax on the gain.

When the out of state siblings file their resident state tax returns, they will either apply for a credit or take a deduction for the Indiana tax paid on the gain so the income is not taxed twice.

If the house was gifted to you, the basis of the property is your parents original cost basis plus the costs of any improvements and sales commissions.

If the house passed to you as an inheritance or was gifted within 2 years of the last to die and includible in the gross estate of your parent, then the cost basis is the date of death fair market value, plus costs of any improvements made to it since the date of death, plus selling commissions.

I hope this helps.

Gerard Samoleski