[DonsASKme]

I (speaking for my sister) inherited our family house, next door to hers in Ohio, and is selling the house with the proceeds to go to myself, one brother and one other sister. My sister will remain in the house next door, which she also inherited, when our father passed away. My sister is living under the poverty line and has not had to file a tax return for years. She is selling the house for the three siblings as it is our inheritance. We understand she will cash the check and immediately (if possible) mail each of us an equal portion. She is receiving Medicare for low income and is concerned that the proceeds for the sale, even though she is not keeping any of it, will impact her poverty status and Medicare benefits. How should she file with the IRS, please?

[AtlantaTaxExpert]

She will have to file a tax return to record the sale, since the house is NOT her primary home.

She would report one-third of the sales proceeds as the realized amount from the sale, with one-third of the value of the house at the date of your mother's death as the basis. You and the other sister would also report the same information on your respective tax returns. This would be done on Schedule D, on which you identify the house as an inherited property. It is likely that there will be little, if any, capital gain, and if there IS a gain, the combination of her standard deduction and her personal exemption will probably result in NO taxes being due.

Now, will the proceeds from the sale (one-third of the value of the house) impact her poverty and Medicare status? I do not know, since no amounts were mentioned. A phone call to Medicare would probably yield a definite answer.