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Level 3
March 27, 2022
Solved

Cost Basis

  • March 27, 2022
  • 1 reply
  • 23 views

2018 Mr Smith buys house for 88k in his own Trust's name. 

2019 Mr Smith transfers house from Trust and records deed in his name AND add's my client's name to Deed.  

2021 Mr Smith dies.  Client finds out his name is on deed after death.  Client sells house for 140K.

Client receives 1099-S.  What should I be using as cost basis on the sale? 88K?  FMV at date of death?

Never had this situation before and need some help and guidance.

Many Thanks!!!

 

 

 

 

This topic has been closed for replies.
Best answer by qbteachmt

"How do you know? Did you see the Inventory?"

This property was only asset NOT in Mr Smith's estate.  He quick deeded it out of his estate and into him and my client's name in 2019.  My client had ZERO to do with the estate or sale of any other assets.

There is apparently no way for client to find out if Mr Smith paid or didn't pay gift tax. He did not gift anything to anybody before his death.  He just did the quick deed on this property.

No clue what to use for FMV on this sale. <sigh>

"Why, me Lord" by Shaggy

 

 

 


"He did not gift anything to anybody before his death."

Yes, he did. You need to look at Timing.

"Client finds out he owns property next door to Mr Jones after Mr Jones dies. Is it a gift?"

It was Gifted in 2019, according to what you are telling us.

"He just did the quick deed on this property."

Yes, that is how he gifted Value to your client.

"No clue what to use for FMV on this sale."

You had no sale, in 2019. There is no applicability of FMV.

"Joint w/ right of survivorship? Yes"

Then your client inherited 1/2 at the FMV, and it seems the client's sale is timely to the DOD, so use that sale price for FMV.

"My client had ZERO to do with the estate or sale of any other assets."

You keep stating things on both sides of the fence, and either they both don't apply, or they both do apply. That is confusing us.

"Who knows what Mr Jones meant it to be."

It is either Sale or Gift, in 2019.

"Is there issue with gift tax in this situation? Now it's not just a BIG shock, he has to pay gift tax on it because Jones neglected to do so?"

Gift tax is the responsibility of the Giver.

You've brought a lot to the topic that does not apply. You need to narrow down to what applies and drop all this other stuff. There is a lot of protesting going on, for who didn't know what, and that doesn't matter. What IS and what legally exists, is what matters.

The probate and estate documents will be helpful. The legal papers matter. What someone else remembers or thinks or intended, does not matter.

1 reply

sjrcpa
Level 15
March 27, 2022

I assume it was a Grantor (Living) Trust?

Since your client did not know about it, Mr. Smith may have added your client's name "for convenience". Then your client gets dod FMV as basis.

On the other hand, if Mr. Smith intended to make a gift to your client, more info is needed.

How was it titled? Joint w/ right of survivorship? Tenants in common? Transfer on death? How much of the property was included in Mr. Smith's estate? What was shown on the Probate filings? Your client's basis may be Mr. Smith's basis, or it may be a portion of Mr. Smith's basis and a portion of the dod value.

The more I know the more I don’t know.
Mary MAuthor
Level 3
March 27, 2022

2018 John Smith, John Smith Revocable Living Trust purchased house.

2019 John Smith, John Smith Revocable Living Trust (seller) did a Intrafamily Transfer and Dissolution changing deed to John Smith, My Client (buyer).

2021 Smith dies, client finds out house is his.  Taxpayer/Client sells house.

Mr Smith purchased two house(s) his and the one next to it.  Mr Smith's residence was in his Trust.  This house was not in trust.  Was it a gift?  IDK.  Yikes.  Am I past help?

PS Thank you, thank you so much!!

 

 

 

 

qbteachmt
Level 15
March 27, 2022

"to John Smith, My Client (buyer)"

This means "sold the house" to your client?

When you change the material facts, you change the picture.

I doubt he was surprised when he "found out" in 2021 that the house he was buying was his. That's why you would be buying it.

"Mr Smith purchased two house(s) his and the one next to it. Mr Smith's residence was in his Trust. This house was not in trust. Was it a gift?"

You changed to Buying. Was there a mortgage or note payable agreement? Was someone paying someone?

Did you want to answer the rest of sjrcpa's questions? Look to the legal documents.

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