Summer home sale

[MGC94]

Taxpayer is a FL resident

Has a NJ summer home (owned jointly with a "spiritual husband" / friend / dependent)

Purchased jointly $200,000 in 2017

Sold $460,000 in 2023 

co-owner passed away 4 months later. They sold the home for health reasons.   

NJ on the settlement sheet took 2% from each of them $4,500 each for non-resident withholding. 

Since this wasn't their primary is there no home sale exclusion? 

There was no 1099 but each 50/50 on taxes?

Do they have to file NJ to get back the 2%?

Can he no longer be her dependent because now he will have income other than social security? 

Thank you

[Terry53029]

You will file a nonresident NJ return for your client. Since friend passed, your client will file as single (if taxable income was higher than $5050 in 2024 cannot be claimed as dependent). No home sale exclusion. There was more than likely a 1099S issued. ( may be in closing papers) Your client will claim 1/2 of proceeds). You asked if he could be claimed on her return ( I thought you said she passed so, no)

[TaxGuyBill]

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@MGC94 wrote:

Since this wasn't their primary is there no home sale exclusion? 

There was no 1099 but each 50/50 on taxes?

Do they have to file NJ to get back the 2%?

Can he no longer be her dependent because now he will have income other than social security? 

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Correct.

If they each owned 50%, yes, both report 50% of the sale.

Why do you think they will get back the 2%?  I don't know NJ rules, but in most states it would be taxable in that state.  At any rate, yes, they need to file a NJ tax return.

If the person's non-exempt income (Social Security is exempt) is over $4700 (2023 amount), you are correct, that person is no longer a dependent.

[qbteachmt]

"owned jointly with a "spiritual husband" / friend / dependent"

Neither of these States has common law marriage, so there is no "husband/wife" here. Were they registered domestic partners?

The deed or title will list JTROS or TIC. What is listed on the closing documents?

[The_AntiTax_Man]

@MGC94  it seems like quite a bit of gain in 6 years.  There may be additional cost basis.  You will have to question your client about the costs of the improvements that they made to the NJ property after it was purchased in 2017.  Be sure to ask about the cost of all of the furnishings inside the NJ house that were included as part of the 2023 sale.  

[qbteachmt]

"There was more than likely a 1099S issued"

By the way, I've been seeing under $500,000 sales don't always get a 1099-S issued. There is a list of 4 questions, if I remember correctly, in the closing docs and as long as you answered No to the one regarding having used the exclusion already in the past 2 years, they don't issue a 1099-S. That doesn't make it not reportable, of course.

While improvements to basis might change the gain, it's not an unreasonable gain for that weird timeframe.

[Accountant-Man]

Since 2% is withholding on non-residents' GROSS sales price, there should be a refund coming, but obviously the NJ-1040-NR must be filed. Also, any adjustments to basis will increase potential refund.

There cannot be an exclusion since it wasn't the primary residence.

Unmarried, so each has to file Single.

[MGC94]

Where do I report the 2% to get it back on the NJ-4040-NR?

Also, where on the software do I put the adjustments to the basis? 

Thank you