Sale of parents home owned with one child with full rights to survivor.

[Hastings]

What is the name of your state (only U.S. law)? Michigan
My dad bought a house approximately 2 years ago. My brother was put on the title as a co-owner with full rights to the survivor in case of death. However ... dad's will states that we all share in the estate equally.

The house was bought for $110K . Sold 2 weeks ago for $125K The realtors commission and closing costs basically equals the "profit" made on the home. However we don't want our brother to get stuck with a tax bill at the end of the year if he has to claim something from the sale. We would all split that equally. Will there be any capital gains tax.... or any other tax on it?

Thanks so much for any help you can give!

 

[LdiJ]

What is the name of your state (only U.S. law)? Michigan
My dad bought a house approximately 2 years ago. My brother was put on the title as a co-owner with full rights to the survivor in case of death. However ... dad's will states that we all share in the estate equally.

The house was bought for $110K . Sold 2 weeks ago for $125K The realtors commission and closing costs basically equals the "profit" made on the home. However we don't want our brother to get stuck with a tax bill at the end of the year if he has to claim something from the sale. We would all split that equally. Will there be any capital gains tax.... or any other tax on it?

Thanks so much for any help you can give!

Ok, I am assuming that your brother was on the deed from the get go, so his basis would be 110k plus any major improvements made to the home. The sales proceeds would be selling price minus closing and realtor costs. Deduct net basis from net sales proceeds and you have the capital gain (or capital loss).
I suspect that your brother will have little to no capital gain therefore little to no capital gains tax.

 

[Ohiogal]

Should we assume dad died?

 

[LdiJ]

Should we assume dad died?

In this instance, the brother would have little to no capital gain whether it was sold while dad was still alive or after he passed away.

 

[justalayman]

You said it was "your parent's" home though. Where is your mother? Is she alive or deceased? Was she included in title to the property? If so, more info will be needed to even guess about the situation. Even if she wasn't Michigan has dower rights which can change the situation.

The will has no effect here. Property held jointly becomes the property of the remaining joint tenants. Brother has no obligation to share anything.

Did brother choose to sell HIS property?

 

[LdiJ]

You said it was "your parent's" home though. Where is your mother? Is she alive or deceased? Was she included in title to the property? If so, more info will be needed to even guess about the situation. Even if she wasn't Michigan has dower rights which can change the situation.

The will has no effect here. Property held jointly becomes the property of the remaining joint tenants. Brother has no obligation to share anything.

None of that information has any bearing on the question asked, and that is if brother would have any tax ramifications. Again, no matter what other information is given, brother will have little to no capital gains.

 

[justalayman]

None of that information has any bearing on the question asked, and that is if brother would have any tax ramifications. Again, no matter what other information is given, brother will have little to no capital gains.

My questions have nothing to do with the capital gains question if you really must know. If you wish to put limits on yourself to address only precisely what was asked, that's up to you. When i see what could be issues for the op I tend to ask about them. Is that ok with you or should I pm them to you for your approval first?


But if there was an issue with capital gains tax (obviously there isn't due to the minimal increase in value and the costs eligible to be deducted from those gains) my questions actually could be pertinent to the question asked.

 

[LdiJ]

My questions have nothing to do with the capital gains question if you really must know. If you wish to put limits on yourself to address only precisely what was asked, that's up to you. When i see what could be issues for the op I tend to ask about them. Is that ok with you or should I pm them to you for your approval first?


But if there was an issue with capital gains tax (obviously there isn't due to the minimal increase in value and the costs eligible to be deducted from those gains) my questions actually could be pertinent to the question asked.

Go back and re-read what you wrote. You did not indicate a change of subject and the way you worded your post made it sound like you were addressing the capital gains issues, in this specific scenario. When I address a potential different issue than the original question asked, I make it clear that I am taking the conversation in another direction.

 

[justalayman]

Go back and re-read what you wrote. You did not indicate a change of subject and the way you worded your post made it sound like you were addressing the capital gains issues, in this specific scenario. When I address a potential different issue than the original question asked, I make it clear that I am taking the conversation in another direction.

So would you like a cookie or a secret prize?

And again, while the fact is there just isn't a real concern of capital gains for anybody involved, the answers to my questions could affect the calculations involved for anybody directly involved.

If for no other reason, if the personal administrator of the estate has taken it upon themselves to sell the house as part of the estate, they could be intermixing estate assets with assets held by others which could cause issues with the administration of the estate. There are problems hinted at in the original post. Op should be alerted to issues if somebody sees any. After all, it's the decent thing to do.

 

[Hastings]

Additional info to original post.... sorry!

Mom was deceased before the house was purchased. Yes... dad died.
The rest of what dad owned (life insurance & personal property) was placed in a trust.
The same brother that was on the house is the trustee.
He's the oldest and handling everything for dad's estate.
I had told him that the house was really his.... we had no claim on it if he chose to go that route. But he said the whole reason dad wanted one of the kids on the house was to make sure it could be sold quickly if necessary (It WASN'T necessary.....dad just worried about everything.)
We have no issues with anything he's done... I just didn't want him stuck with any taxes 6 months from now!

One person answering said "mixing his personal property/money with that of the estate." I see that now.... would that make any difference if there is no tax liability (due to the cost basis of the house + real estate commission and closing costs equaling slightly more than the selling price)?

Thanks again!

 

[justalayman]

Mom was deceased before the house was purchased. Yes... dad died.
The rest of what dad owned (life insurance & personal property) was placed in a trust.
The same brother that was on the house is the trustee.
He's the oldest and handling everything for dad's estate.
I had told him that the house was really his.... we had no claim on it if he chose to go that route. But he said the whole reason dad wanted one of the kids on the house was to make sure it could be sold quickly if necessary (It WASN'T necessary.....dad just worried about everything.)
We have no issues with anything he's done... I just didn't want him stuck with any taxes 6 months from now!

One person answering said "mixing his personal property/money with that of the estate." I see that now.... would that make any difference if there is no tax liability (due to the cost basis of the house + real estate commission and closing costs equaling slightly more than the selling price)?

Thanks again!

Thanks for the follow up.
Since mom is already gone, the house became your brothers. What he does or did with it was completely up to him. He did not have to sell it and he had no obligation to share any proceeds with anybody. I understand what and why your father and brother did what they did though.

My statement about intermixing estate and his personal assets was to alert you to the possibility based on what you posted previously. The house was your brother's property and is completely separate from your father's estate or the trust. It needs to be treated that way lest there could be problems. Any tax issues of the estate are estate issues and your brother's tax issues are his own. Mixing the two could result in your brother facing civil suits and possibily even criminal charges if it resulted in him benefitting from the matter if it came to the attention of the local prosecutor (it probably wouldn't unless an heir brought it to the attention of the probate court or prosecutor so it's (hopefully) unlikely to become an issue given the relationship between the siblings suggested by your posts).

Being the personal representive of an estate places a fiduciary duty on the person. Violating that duty can be a serious matter.

I am not intending to suggest brother has acted improperly or he is at risk as I do not know the specifics of the situstion. My statements are meant more as a caution to be cautious he does act properly. Most people should engage an attorney to assist in administering an estate to avoid problems.


One other comment due to this latest post; just as the home became your brothers due to the title issue, life insurance benefits belong to the named beneficiary. Unless the beneficiary was the estate or the trust, the benefits belong to the person named and just as with your brother and the house, the named party is free to do what they wish with those benefits.

 

[davew128]

Your brother would have a capital loss for the amount of sales costs. This isn't a matter for the estate, the property became his by operation of law.