Legal Question in Wills and Trusts in New Jersey

Re: sold inherited home-tax implications

I do not know what possible inheritance or estate tax returns were filed for your mother-in-law's estate, if any. If there were these type of returns filed, the house would have been valued at its fair market value at her date of death, which presumably is the same price at which it was sold. If no returns were filed for the estate, you could argue that the sales price is the same as the date of death value. If a return was filed, the value reported in the return is your husband's "basis" or cost, and any differential between this value and the sales price represents a gain or loss for his income tax reporting. He is required to complete Schedule "D" (Capital Gains) as part of your personal tax filing, reporting his share of the sales proceeds as the selling price. There are a few nuances in completing this form. Usually, the form indicates his share of the gross sales price (e.g., one-half of the $175,000 selling price or $87,500). However, there may have been expenses incurred in the sale, such as broker's commissions, legal fees, recording fees and other closing costs. These amounts are included in the seller's side of the closing statement. One-half of the amounts can be claimed by your husband as additional "cost" items, which may reduce any gain or increase any loss. Finally, since the house was inherited, he can claim ownership from the date his mother first bought the house. This date would be used as the date of purchase. This would probably qualify any gain/loss as long-term, rather than short-term. This distinction is only important if there is a net gain, as it would qualify the gain for favorable income tax treatment. If you need assistance in filing your return, or knowing what specific information to show in Schedule "D", you could send me a copy of the closing statement, along with a copy of the page of the inheritance/estate tax return where the house was reported and a copy of the Form 1099. If there were no returns filed for the estate, the closing statement and 1099 would suffice. I will make the calculations for you, for a fee of $50. Alternatively, if you use an accountant to prepare your returns, give him these documents and he should be able to make the same calculations I would.