Legal Question in Wills and Trusts in Pennsylvania

Your sister and mother (if she is alive) need to see tax professionals. If your mother gave the mobile home outright to your sister, then yes, a gift tax would be owed. Since the gift was made 7 years ago, the tax rates applicable at that time would apply. Gift taxes are paid by the donor, your mother. Also, a person can give a certain amount of money away to anyone else and not have to pay gift taxes. The amount right now is $13,000. It was lower 7 years ago, but I don 't know how much the rate was. So at most your mother would have to pay on whatever the home was worth minus the amount that could be given free of tax. However, a person can make a certain amount of gift taxes during their lifetime and would not have to pay. I don't know what other assets your mother has and whether she can take advantage of that or not. That is why she would need to consul a tax professional. You indicated that your mother has dementia. If she is still alive, does she have a person to act as her financial power of attorney? If so, does the power of attorney allow her agent to consult with tax professionals? If it does, the agent may need to consult with a tax professional.

Your second question is whether your sister owes capital gains tax. The answer is yes if the home was sold at a profit. Did she live in the home? There is an ownership test. If your sister lived in the home and owned the home for at least 2 years (consult a tax professional or the IRS publlications on this issue), then your sister can exclude up to $250,000 of gain from her tax. She can exempt more if she is married.

I do not know when the home was sold or what the rates were at the time of sale. Assuming that neither of the above tests are met, then capital gains tax would be owed on the amount of gain. Gain would be measured on what the home was sold for minus whatever your sister's basis would be. Her basis would be what the home was worth when it was given to her 7 years ago.

Mobile homes are not like real property and do not necessarily appreciate the same way. That is why your sister should also consult a tax professional, like a CPA.

This really is not a probate question; its a tax question and you might also want to ask a tax attorney, in PA if the mobile home is located there. If not, then ask a tax attorney in the state where it is located.