My mom passed away in 2014 at the age of 91. Her home was the only asset she had. She and dad lived in the home for over 50 years. He passed in 2008. The home was sold for $85k in 2014 which was lower than our asking price (the home is in a small town where real estate doesn’t move very fast). The home was owned outright. The home was in a trust and at the passing of both parents the assets of the home was to be divided between my sister, brother and me (the only beneficiaries). There were some nursing home expenses, utilities bills and a balance due to the funeral home. So we each netted $23k.
My question is .. do we report our inheritance on our taxes and if so what form do we use? Any answer you can provide is greatly appreciated. Thank you.
Terry Says: The estate will need to file a final tax return, typically done in the year of death, or when the estate is distributed. The executor of the will is typically charged with this responsibility. But check with the estate attorney (or a tax advisor) to make sure that the form is filed by April 15th. You do not have to report the inheritance on your own tax return. But if any income was earned on the money deposited upon sale of the home, and before the payout, there might be income tax due to the estate (typically only if the amount earned is over $600.) Again, check with the attorney who handled the probate of the estate. But as to your major question — about reporting the money you received as a distribution — this is not taxable to you as beneficiary and does not have to be reported.