The caller said his mom was facing a huge tax bill. She had agreed to help her child and had signed on to their mortgage, so the house was in her name. Her child fell on hard times, and since the house was worth a lot more than when it was purchased, they decided to sell. The kids sold and made a big profit. The tax bill came to Mom – capital gains tax! There was some money left in her child’s savings, but everyone had planned on using that money to help with the apartment rent for her child, who was now a widowed parent. There wasn’t enough left to pay the taxes. No evil intention, just bad planning.
Her child remembered being asked if taxes should be deducted but didn’t know why it was important. No one thought about Mom getting the bill. The IRS says Mom owes the taxes because she was on the title, and her Social Security number was on the loan, so she owes the taxes on the gain even though her child made the payments on the loan. Ugh – a big transaction with no advice, both on the purchase and the sale.
Fortunately, I have a contact who knows how to work with the IRS. We can’t make the taxes go away, but since paying all the money right now would cause a burden, my contact has negotiated a payment plan without any penalties (interest yes, but cheaper than any of the other options). This story is a lesson for others – get advice before you enter into any major transaction.
