Tax Question: Filing taxes on deceased mom

May 14, 2016 14:37:19 GMT @shecallsmenana said:

Mom died March 2015 - I am quite sure I need collect all her paperwork and file but I have no clue where to start

Mom sold a duplex in 2014 - we also sold her house in 2015 and she had a place in calif. she sold to a friend that was making monthly payments for the past 12 years that friend ended up selling in 2015 and paid us the balance (approx. $15K)

I have no clue where to start on finding her paperwork for the sale of the duplex or for the paperwork on buying the various places -

I really want to get this filed and behind me so I can go forward but I just have no clue where to start or what I need to file

Any suggestions on where to start? knowing I don't have all the paperwork needed?

I appreciate any and all help

Thank You

OK. Partial info headed your way.

RE: CA property sold to her friend.   www.irs.gov/pub/irs-pdf/p537.pdf

     Find the prior tax returns. When collecting installment payments on a sold property, the income is apportioned to interest and principal. The interest would be taxable, the interest would not. The prior returns should shed some light on this. She probably was using the Installment Method to declare the income. If so, the principal is split between basis and profit. The returns should also shed some light on these percentages.

RE:  2014 sale of the duplex   www.irs.gov/publications/p527/index.html

     This would have been handled on the 2014 taxes. You do not mention whether the 2014 taxes were filed. If they were, the only way they should affect the 2015 taxes is if this was also an installment sale. If the taxes were not filed for 2014, I would start with the closing statement. This could be obtained from the title company or the realtor if you have not found your mother's copy. 

     I am assuming that the duplex was rented out. In that case, the 2014 return would include a Schedule E for income and expenses. Refer to prior year returns to see what kinds of expenses she had on the rentals. If she had a property management company, they should have figures for the income received (reported to mom on a 1099) and the expenses that they paid out on her behalf. Most of the rental properties I deal with have additional expenses paid out by the owner themselves.

     As for the basis of the property, that will be more difficult to find. How long did she own it? Again, if it is a fairly recent acquisition, you may be able to get a copy of the closing statement for the purchase of the duplex from the title company or the realtor. I would contact any title company and find out how long they keep records of the closing statements. That may give you an idea as to whether this route is feasible. If not, you should be able to get info from the county government. I know in our county we can look up a lot of info on the county website. The assessor's office will often list details of documents regarding the property in their information. (I could be wrong...it might be the treasurer's office.) I would place a call and find out if that info is available via the internet.

     As a rental, depreciation would have been deducted each year. The prior returns should shed some light on this. I do not know how long it was a rental or how long mom kept returns. If it was fairly recent or if she is a pack rat, the prior returns will reveal info on the basis and the depreciation taken. The recovery of the depreciation will be ordinary income. Capital gain/loss will apply to the difference in the purchase price and the sales price.

     If mom lived in the duplex at some point, it could get more complicated. We will not go there at this point. Some of this topic will come into play below.

RE: 2015 sale of her principal residence.  www.irs.gov/pub/irs-pdf/p523.pdf

   There is/was a one time exemption for gains on the sale of a principal residence. I am not current on that issue, and you are not paying me, so I won't do research on that. It should be included in the publication listed above.

    Again, closing statements, etc can be found in the same ways listed above.

Did your mother have her returns professionally prepared? If so, the professional will already have a large portion of all this info on file. I know that when a client purchases a property, I will go ahead and take copies of the closing statement for future reference. lt will be needed when the property is rented or sold. They will also know what kind of rental expenses she had and they will have records regarding the installment sale and payments of the duplex. If possible, I would use the same professional as she did. Otherwise, you will be paying a new professional a lot of money to compile information that her professional already has.

ETA:  Another publication you may find helpful.   www.irs.gov/pub/irs-pdf/p559.pdf