Do I Owe MO Capital Gaines Tax?

[Soconfused121]

Sold house in 2003 for 45K; 7K more than Assessor appraised that yr. Orig owner died in 1990's; was relative. I never lived in this house. House passed through small estate. Was deeded to me via quitclaim by aires of decedent. State of MO now (after all these yrs) claims the 45K as taxable income. Aires of decendents also received various shares from the sale.

Do I owe capital gaines tax? If so, on what amount? I thought this was considered a gift. I would not had bothered with this otherwise, I was only trying to help relatives.What is the name of your state (Missouri

 

[TinkerBelleLuvr]

When did you acquire the house?

 

[davew128]

When did you acquire the house?

Not relevant.

OP, did you file a Missouri return the year of the sale?

 

[LdiJ]

Sold house in 2003 for 45K; 7K more than Assessor appraised that yr. Orig owner died in 1990's; was relative. I never lived in this house. House passed through small estate. Was deeded to me via quitclaim by aires of decedent. State of MO now (after all these yrs) claims the 45K as taxable income. Aires of decendents also received various shares from the sale.

Do I owe capital gaines tax? If so, on what amount? I thought this was considered a gift. I would not had bothered with this otherwise, I was only trying to help relatives.What is the name of your state (Missouri

You would owe capital gains tax on the actual gain. The gain would be the difference between what the house was worth when your relative died plus any improvements or major repairs you made to the house, and the value of the house when you sold it...assuming that there was a gain rather than a loss.

You would also owe federal capital gains tax on any gain as well.

If you rented out the house between 1990(?) and 2003 you may also have to recapture depreciation.

Get yourself to a local tax professional ASAP. You are going to want to amend your 2003 tax returns to reflect the sale.

 

[Soconfused121]

I acquired and sold the house in 2003. I had no earned income and did not file a state nor fed return. I did not think it was subject to the cap gaines tax. I'm just hearing from the state about this; nothing from the feds thus far. I spoke to an attorney over the phone a year ago after hearing from state of MO; attorney stated I only owe county taxes thats paid during closing and nothing to state. Orig owner died in late 1990's and house just set for 9yrs until I tried to help out. It did pass through probate. I never rented the house it was illegally occupied by a former friend of orig owner...he never paid rent.

 

[davew128]

I acquired and sold the house in 2003. I had no earned income and did not file a state nor fed return. I did not think it was subject to the cap gaines tax. I'm just hearing from the state about this; nothing from the feds thus far. I spoke to an attorney over the phone a year ago after hearing from state of MO; attorney stated I only owe county taxes thats paid during closing and nothing to state. Orig owner died in late 1990's and house just set for 9yrs until I tried to help out. It did pass through probate. I never rented the house it was illegally occupied by a former friend of orig owner...he never paid rent.

It's a long term capital gain of $7k. Whether you owe tax or not requires that a return be completed first, but MO doesn't KNOW your gain is only $7k only that it sold for $45k, which is why you need to do the return.

In the future, don't accept income tax advice from real estate attorneys. EVER. Their missteps in tax are legendary.

 

[anteater]

It's a long term capital gain of $7k. Whether you owe tax or not requires that a return be completed first, but MO doesn't KNOW your gain is only $7k only that it sold for $45k, which is why you need to do the return.

I think that you are misinterpreting, Dave.

The OP said:

Sold house in 2003 for 45K; 7K more than Assessor appraised that yr.

1) I assume that the OP means what the assessor said in 2003.
2) Even so, that sounds like an appraisal for property taxes.

 

[davew128]

I think that you are misinterpreting, Dave.

1) I assume that the OP means what the assessor said in 2003.
2) Even so, that sounds like an appraisal for property taxes.

You may be right. The use of punctuation by OP is difficult to follow. I read it to be an erroneous period and the assessment was done the year the old owner died.

 

[Soconfused121]

Thanks everyone.

The county assessor appraised the property in 2003 at $38K, and I sold it in 2003 for $45K. Private appraisor used in the sale was exactly $45K. The owner died in late 90'S. Wouldn't the gain just be the $7K? Can't I just send proof of the county appraisal and sale price? They're threatening a lien against me....I have nothing at this time.

 

[anteater]

Thanks everyone.

The county assessor appraised the property in 2003 at $38K, and I sold it in 2003 for $45K. Private appraisor used in the sale was exactly $45K. The owner died in late 90'S. Wouldn't the gain just be the $7K? Can't I just send proof of the county appraisal and sale price? They're threatening a lien against me....I have nothing at this time.

No.

The cost basis is the fair market value when the relative passed away in the 90's plus any improvements between then and the sale. (From what you say, there probably were no improvements.) That was the cost basis for the relatives that inherited and that remains the cost basis when it was gifted to you.

The capital gain is the difference between the cost basis and the net sales proceeds.

(It's not rightly part of the question/answer, I admit. But why the convolutions in selling the property?)

 

[davew128]

Thanks everyone.

The county assessor appraised the property in 2003 at $38K, and I sold it in 2003 for $45K. Private appraisor used in the sale was exactly $45K. The owner died in late 90'S. Wouldn't the gain just be the $7K? Can't I just send proof of the county appraisal and sale price? They're threatening a lien against me....I have nothing at this time.

You were already told to file a tax return reporting the correct capital gain on the sale of the property.....

 

[LdiJ]

Thanks everyone.

The county assessor appraised the property in 2003 at $38K, and I sold it in 2003 for $45K. Private appraisor used in the sale was exactly $45K. The owner died in late 90'S. Wouldn't the gain just be the $7K? Can't I just send proof of the county appraisal and sale price? They're threatening a lien against me....I have nothing at this time.

I am actually confused on the ownership trail and would like OP to clarify some things for us.

1) Who inherited the house when the relative died?
2) How did you "acquire" it in 2003?
3) How were you "helping out relatives"?
4) How was the money divided?
5) What was the stated value of the house when it went through probate?

I tried to send you to a tax pro when you first posted, because there are lots of unanswered questions that effect how the taxes work. Please answer all of those questions.

 

[Soconfused121]

1. The owner had no will. Probate granted house to his surviving wife and children....His children (adults) didn't know how to sale the home. They hired a real estate agent the year of death (1995), but couldn't sell it and didn't want to do improvements...and didn't want to keep paying the taxes....so they basically just let it sit. They were going to lose it due to tax delinquencies. They no longer cared about this house.

2. I offered to try to sell it as opposed to just losing it. They deeded it to me via quitclaim. I paid the property taxes and spent approx $5K on improvements.

3. At closing, I only received a check for $37K (not the $45K due to trumped up broker fee's, etc.)

4.Out of this $37K, I distributed $18K to children of the descedent (orig owner's wife died right after he did). I have copies of the ck I rec'd at closing and copies of cashiers cks to each child of deceased. $10K stated prob value

 

[Soconfused121]

Also the $10K value shown on the probate value, I believe was just pulled out of the air...it made no sense to me....a 3 bdrm, 3-car garage, full basement, and nice hardwood floors...just needed a few improvements.

 

[Soconfused121]

You were already told to file a tax return reporting the correct capital gain on the sale of the property.....

Not exactly, the are asking me to pay $2700 based solely on the $45K that was reported as income rec'd in 2003. They do not know anything about the sale of the house yet.