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Old 08-23-2019, 11:40 AM
 
69 posts, read 22,612 times
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Again, I am trying to be helpful but you are literally confusing different sections of the tax code to disastrous effect. I don't know where you are getting your information but it is all wrong!!

GET A COMPETENT CPA NOW AND DON'T SELL THE PROPERTY BEFORE YOUR MOTHER DIES!!!!!!!!
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Old 08-23-2019, 12:00 PM
 
11,443 posts, read 11,435,897 times
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Quote:
Originally Posted by 182pilot View Post
Again, I am trying to be helpful but you are literally confusing different sections of the tax code to disastrous effect. I don't know where you are getting your information but it is all wrong!!

GET A COMPETENT CPA NOW AND DON'T SELL THE PROPERTY BEFORE YOUR MOTHER DIES!!!!!!!!
I truly appreciate the advice. The listing was signed while she was well. During the renovations she got seriously ill. I was committed to selling and paying the capital gain before all this happened because she needed the net proceeds for her expenses. If I back out of the contract I'll owe the brokerage a commission. Do I lose the $60K commission or continue on the possibility she'll pass before the sale occurs? Hard choices for a son who also has to wear the hat of a trustee for the beneficiaries of the trust.



Most of my info came from these websites:


https://viridianadvisors.com/income-...-a-decedent-3/


https://turbotax.intuit.com/tax-tips...mily/L5albFXM4


Quote:
Since the basis is the amount from which any gain or loss will be figured when the new owner ultimately sells the property, this means that the tax on any appreciation that occurred during the taxpayer's life is essentially forgiven.
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Old 08-23-2019, 12:06 PM
 
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Update. The ALF just called. They sent her to emergency for a third time this month. I'm waiting for the doc to call to give me her diagnosis. It may be cancer returned.
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Old 08-23-2019, 02:09 PM
 
6,882 posts, read 8,236,091 times
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Quote:
Originally Posted by thrillobyte View Post
I truly appreciate the advice. The listing was signed while she was well. During the renovations she got seriously ill. I was committed to selling and paying the capital gain before all this happened because she needed the net proceeds for her expenses. If I back out of the contract I'll owe the brokerage a commission. Do I lose the $60K commission or continue on the possibility she'll pass before the sale occurs? Hard choices for a son who also has to wear the hat of a trustee for the beneficiaries of the trust.
You should start by seeing if you can delay the closing by a couple of months. Do you know much about the buyer? Maybe they would be willing to delay the sale. You can't just back out of a contract without possible consequences (i.e. lawsuit), but any decent broker would allow you to even pull a listing if the buyers were in agreement. They would get paid eventually. If it were me, I'd offer the buyers a price reduction commensurate with the longer that they could wait to purchase.

What commission rate did you agree to? $60K would be over 8% at your ballpark sales price.

Whatever happens, you made your decision to sell based upon information that you had at the moment. Don't lament paying the tax if the inevitable happens shortly after a sale. Life in unpredictable.
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Old 08-23-2019, 03:10 PM
 
11,443 posts, read 11,435,897 times
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Quote:
Originally Posted by jackmichigan View Post
You should start by seeing if you can delay the closing by a couple of months. Do you know much about the buyer? Maybe they would be willing to delay the sale. You can't just back out of a contract without possible consequences (i.e. lawsuit), but any decent broker would allow you to even pull a listing if the buyers were in agreement. They would get paid eventually. If it were me, I'd offer the buyers a price reduction commensurate with the longer that they could wait to purchase.

What commission rate did you agree to? $60K would be over 8% at your ballpark sales price.

Whatever happens, you made your decision to sell based upon information that you had at the moment. Don't lament paying the tax if the inevitable happens shortly after a sale. Life in unpredictable.

The property won't be marketed for another two weeks or so. We're still doing renovations. I negotiated a higher percentage to the broker for arranging the renovations. I'm just not up to it anymore. No buyers at this point. Just the listing.
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Old 08-23-2019, 05:38 PM
 
Location: Southern New Hampshire
7,345 posts, read 12,888,910 times
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Quote:
Originally Posted by thrillobyte View Post
You're damn right I'm annoyed [at paying taxes on hundreds of thousands of dollars in unearned income]. Wouldn't you be??????
Actually, no, I wouldn't be, if I were getting literally hundreds of thousands of dollars that I didn't actually earn myself. For me, that would be like winning the lottery -- unexpected and certainly unearned.

Quote:
Originally Posted by thrillobyte View Post
I managed the property for 10 years and put up with all those headaches a rental property brings so the money isn't "free".
Hmmm, OK, well, I've been a LL for a bit over 7 years myself, and I understand that it can be a pain ... but honestly, the number of hours I've had to work over those 7 years has averaged out to MAYBE 2-3 hours a month? I'm actually over-estimating, as it's likely been quite a bit less (most months have been zero hours other than going to the bank to deposit the tenants' check). YMMV, of course, and I understand that.

My mom died on 7/3/19 and I just got my 1/3 share of a $5,000 life insurance policy -- which is all my lower-working-class mother could afford when she bought the policy many decades ago -- and I signed my portion all over to my younger sister, who lived in the same city as my mother and was basically her caregiver for the past several years. The idea of making money off my mother's death is truly bizarre to me.

So yeah, I simply have no understanding of hundreds of thousands of dollars in basically free money (even if a bit of it was "worked for" in property management) ... sorry.

And Thrillobyte, I AM sorry about how your mother is doing. My mom took a fall in March 2019 and less than 4 months later she died, so I have no illusions about this stuff. I know how difficult it is, but honestly, if I was going to inherit several hundreds of thousands of dollars, that would have made things a little different. Not easier, because it's my mother and that's always going to be hard, but different. So yes, I understand, but I would not begrudge paying taxes on hundreds of thousands of dollars that I didn't earn myself. (I mean, even after PAYING taxes on hundreds of thousands of dollars, I'd still be LEFT WITH several hundreds of thousands of dollars that I did not earn myself -- so I would be annoyed, why?!!) Typical working-class mentality, I guess -- you have to actually earn whatever you get. (What a bizarre idea ... )
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Old 08-23-2019, 06:09 PM
 
6,882 posts, read 8,236,091 times
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Quote:
Originally Posted by thrillobyte View Post
The property, unfortunately IS under contract and I would be on the hook for the commission. It's a "which is the greater evil" situation. But as I read it the tax actually could be subject to double taxation, though one tax would be cancelled out by the $11 million estate exemption. The big question is whether the tax jumps from the 20% capital gain tax to 40% tax on ordinary income. The basis is $16K and the sale will be in the $725K neighborhood. But my mother will need the income if she pulls through. They got ya coming and going.
Quote:
Originally Posted by thrillobyte View Post
The property won't be marketed for another two weeks or so. We're still doing renovations. I negotiated a higher percentage to the broker for arranging the renovations. I'm just not up to it anymore. No buyers at this point. Just the listing.
You're saying different things in different posts. If it's not even marketed yet, you should hold off if at all possible. How much would you need to pay for your mother's care for another year? Isn't there some other way that you could secure that money? Take it one year--or six months--at a time.

That also seems like a hefty fee that you're paying for the minimal work involved in overseeing a few contractors.


EDIT: Tell your broker that you want to delay the listing. They haven't secured a buyer for you yet, so it would be highly unlikely that you would be on the hook for the commission.

Last edited by jackmichigan; 08-23-2019 at 06:23 PM..
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Old 08-23-2019, 10:00 PM
 
11,443 posts, read 11,435,897 times
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Quote:
Originally Posted by jackmichigan View Post
You're saying different things in different posts. If it's not even marketed yet, you should hold off if at all possible. How much would you need to pay for your mother's care for another year? Isn't there some other way that you could secure that money? Take it one year--or six months--at a time.

That also seems like a hefty fee that you're paying for the minimal work involved in overseeing a few contractors.


EDIT: Tell your broker that you want to delay the listing. They haven't secured a buyer for you yet, so it would be highly unlikely that you would be on the hook for the commission.
Sorry, Jack. I'm using bad terminology. When I said it was "under contract" I meant it was under a listing agreement. This property has never been past the listing stage. The agent is a friend of mine and needs the sale. I realize that's no reason to lose a few hundred thousand dollars in capital gain tax, but my mother is equity rich and cash poor. I haven't got that kind of money to carry her $5000/mo care. I'd never re-rent the property after getting it all fixed up just to have it trashed by tenants with four comfort care curs. All that's left is selling, taking the capital gain hit and use the leftover to pay for her care. It's a terrible situation for a son to be in: profit from her death or lose the money to taxes if she survives. Of course I'd gladly pay the taxes. If I were younger I might brave the pitfalls of LL-hood but right now I'm simply too old to endure that kind of stress.
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Old 08-23-2019, 10:47 PM
 
7,254 posts, read 4,015,380 times
Reputation: 15358
Quote:
Originally Posted by thrillobyte View Post
I managed the property for 10 years and put up with all those headaches a rental property brings so the money isn't "free".
If you managed the rental property without being paid a fee for such services your complaint is with the entity that was the legal owner of the property, or yourself, not the taxman.

It certainly appears that postponing the listing would simplify the situation.

Best wishes for your mother.
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Old 08-24-2019, 12:03 AM
 
6,882 posts, read 8,236,091 times
Reputation: 12015
Quote:
Originally Posted by thrillobyte View Post
Sorry, Jack. I'm using bad terminology. When I said it was "under contract" I meant it was under a listing agreement. This property has never been past the listing stage. The agent is a friend of mine and needs the sale. I realize that's no reason to lose a few hundred thousand dollars in capital gain tax, but my mother is equity rich and cash poor. I haven't got that kind of money to carry her $5000/mo care. I'd never re-rent the property after getting it all fixed up just to have it trashed by tenants with four comfort care curs. All that's left is selling, taking the capital gain hit and use the leftover to pay for her care. It's a terrible situation for a son to be in: profit from her death or lose the money to taxes if she survives. Of course I'd gladly pay the taxes. If I were younger I might brave the pitfalls of LL-hood but right now I'm simply too old to endure that kind of stress.
Some friend. If you were my friend I'd lower the commission or not charge any at all. Regardless, do what is best for you. You should try to delay any sale as much as possible. Your friend will still get paid. Have you checked into home equity loans or lines of credit? (Sorry, I forget what all you have said about this in other threads.)
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