Q: My mother died in 2002 and my father passed away in January. They owned a home in Florida that they bought in 1967 for $16,500. After mom died, my father put me on a new deed with him. We became joint tenants with the right of survivorship. When Dad died, I became owner of the house. I sold it in March for $232,000. First, do my husband and I have to pay taxes on this? Different sources tell me different stories! Second, my parents' will said everything is to be divided equally among their three children. I need to know the right answer to my tax question so I can distribute one-third of the money to each of my two brothers. Do I take out money for any taxes I may have to pay before I give them their share?
J.M., via e-mail
A: Diane Kennedy, a San Francisco CPA and a coauthor of "Real Estate Loopholes: Secrets of Successful Real Estate Investing," says you're getting different responses because of the joint ownership situation. She says you need a professional planner who can look at when you received your interest in the property, how the title was held (joint tenant, tenants in common, something else), etc.
One possible scenario is that your father gifted you an interest and it was held as joint tenants with rights of survivorship. That means that the house became yours upon your father's death. You would have received a stepped-up cost basis and quite likely there would be no tax.
But you might have an unresolved tax consequence from the initial gift. And if you then decide to give some of the home sale proceeds to your brothers, they'll be subject to gift tax.
This is an excellent example of the need to properly plan property transfers. Ms. Kennedy says she has often seen elderly parents put a child on a home's title to aid in transfer upon their death without realizing the estate- and gift-tax consequences.
Q: I sold some Bell South stock last year, but have incomplete records to determine its cost basis. Can you help?
J.H., via e-mail
A: Chuck Carlson, editor of the DRIP Investor newsletter, offers software to compute the cost basis for AT&T stock and related companies, including Bell South. The software covers all AT&T corporate actions going back to 1954 and can be downloaded at www.atttaxcalculator.com for $14.95.