Property tax lein sale

[KrisR]

Client who is 83 years old received 55K from a property owned by father and step mother. Client's father has been deceased over 40 years ago and stepmother over 5 years., and did not have any contact with them for decades. Client did not know of the existence of the property.  Client is the only nlearnt of the unclaimed funds from a firm that tracks potential owners, and earns a fee. The state of Georgia made a tax lein sale to settle the outstanding tax and the remaining $55K  was paid out to client.

Question? Is the $55K taxable or not?

Thanks in advance .

[sjrcpa]

Maybe some of it is.

Client's basis in the property is the date of death FMV.

Did he inherit from the father or stepmother?

[KrisR]

Client has zero knowledge of the property - has been out of contact with dad for over 40 years. Client lives in NY, parent in Georgia. This is an unexpected windfall. Did not inherit in the true sense. Just got the excess from the proceeds after the tax lein was satisfied.

[BobKamman · Accepted solution]

You're probably missing some facts.  He would not inherit from a stepmother, unless she left a will.  My guess is that the father had put it in joint tenancy with him, before his death, and he didn't know about it.  Ignorance is no defense if he cashed the check.  Get the deed.  If the stepmother's name was on it, use her date of death.  If not, use the father's date of death.  

[KrisR]

Thanks so much for your guidance. It is much appreciated. I guess I've got some more digging to do!!

[qbteachmt]

"Did not inherit in the true sense. Just got the excess from the proceeds after the tax lein was satisfied."

That's called Inherited.

"from a firm that tracks potential owners"

And then submitted to get that payment. And it was issued. That = rightful heir.

Instead of getting the property, your client got the residual from the sale. Same meal, only a smaller bite. And given the expenses that were paid for however many back years, it is possible there isn't much gain here.

[BobKamman]

I think it's more likely that there was a $100,000 gain and after payment of back taxes (subject to $10K limit) the payment was only $55,000.  

What would be worse than joint tenancy, is dad leaving a life estate to widow/stepmom and remainder interest to son.  So that's probably what it will turn out to be.  Hope the OP comes back to tell us.

[KrisR]

Thank you!!! You captured the essence of the transaction and broke it down in an easily digestible way. Much appreciated.

[KrisR]

Thank you for your reply. I sure adds clarity for me to proceed. Much appreciated.