I own 25% of my moms home. This is her prim residence not mine. It is sold , what are the tax ramifications?

Question

We have sold her home. The money is all hers but it is in 4 names total. How do we claim and protect the proceeds.

Answer 1

Upon the sale the Tittle Company should have issued a 1099S to each person with an interest in the property and they are subject to the tax if there is a gain. Your mother may have an exclusion if she lived in the house as her main residence 2 of the last five years prior to the sale. If others lived in the house as their main residence in the exclusion period they also would have an exclusion.

Answer 2

There are letter rulings available for viewing at the IRS which give the $250,000 exclusion to all owners of a property in which there was gain.

As her primary residence, your mother will be given the $250,000 exclusion as long as she lived in the home 24 months during the last 5 years (60 months prior to sale).

If the sale of her home was due to extenuating circumstances there may be available exclusions or pro-rated exclusion amounts for the other "owner's of the property".

Contact an Enrolled Agent in your area for more information. An Enrolled Agent specializes in tax and will be most able to assist you in determining if the other owner's of your mother's residence may qualify for the reduced exclusion amounts; thus alleviating capital gain.

Answer 3

She gets to exclude the gain on her share if she meets the 2 of 5 year rule.

Everyone else pays capital gains tax on their share of any gain since they don't qualify for the exclusion as it's not their principal residence.

Answer 4

If she lived in it for at least two years she can make a profit at time of sale of $ 250,000 and there is no tax whatsoever.