Early SS Withdrawal or Inherited home?

[pb4uski]

I suspect that she is not declaring income or depreciation. She is "renting" to family at below market costs, or not renting at all, with her son occasionally pitching in to cover expenses. So it is simply a 2nd family home, not a rental at all. she is paying the expenses on it, so I do not see this as her getting some economic advantage. she may be losing money or breaking even at best. I would not go in with an adversarial affect. it won't help.

I was thinking the same thing... it isn't a rental, just a second home owned by the LLC and the nephew uses it an sporatically pitches in towards the cost. With that view you might avoid depreciation recapture but still get LTCG treatment for any gains.

 

[Camas Lilly]

I would be inclined to give her the benefit of the doubt if you think she is exaggerating her improvements costs. just get it off your plate. It is not worth a family rift. You asked her for a lot of information, but she may still not be clear as to what you exactly want.

I think she was giving partial answers in order to NOT be adversarial, as she may not have had time to pull all that together and did not want to ignore the inquiry. OK - ? possible?
yes, her son got a cut rate place to live. Is that worth a family feud? It was a family member. She wasn't collecting rent and pocketing money. You could state a case that sister owes her "rental" income, I wouldn't go down that road. that is why the 3rd brother wants out of the whole thing. and she should too.


Just had meeting with SIL and Brother. While we all agree she should be more transparent about the LLC and we should have, at the very least on an annual basis, been apprised of our interests, we are going to give her the benefit of the doubt, for now.

She indicated she didn't have time right now, but remembering she is a CPA, we should know she really is very busy right now with tax deadlines looming and she has been known to have three jobs at the same time. This is not really out of character.

Secondly, we decided we should be more clear about what information we want to know, why we want to know it, ask some general questions about taxes and then ask when she thinks she could provide that information.

So yes, a couple of steps back, take a breather and try again. If that doesn't produce results we will go from there, but Brother seems to think there is no reason to panic, yet.

 

[pb4uski]

CPA here. It shouldn't take Sis much time at all to email to you copies of the LLC tax returns for 2018 and 2017.... I would also think that 2019 should be done or close to done. Or for that matter any relevant documents that she does have.... you're not asking her to prepare anything... just to relay existing information.

Though from what you described it seems possible that there are no tax returns.

 

[ivinsfan]

Now I'm confused. Does your brother actually have an ownership in this home?

If not why is he even involved at this point? I have a sister like this too. I have to think of six different way to phrase a simple question so I don't risk offending her or setting her off. If she brusque or unresponsive I'm supposed to wrack my brain and see if I said something wrong or am putting too much pressure on her.

You do understand that a grown woman could type the words.. I'm really busy with the extended tax season right now, can I get back to you after July 15?

She apparently has asked what YOU want to happen with this house...even after reading 4 pages here I can't figure out what you really want. I know for sure you are apprehensive about offending your sister, while you are waiting to recontact sister it might benefit you personally to put your wishes in writing to share with her at that time.

As I said you have my sympathy cause these patterns are lifelong and hard to break..deep down you probably know it won't be easy or pretty to make something happen but I wish you the best.

 

[youbet]

The amount of "drama" being added to this sad situation by my fellow posters is entertaining, to say the least!

 

[youbet]

I would be inclined to give her the benefit of the doubt if you think she is exaggerating her improvements costs. just get it off your plate. It is not worth a family rift. You asked her for a lot of information, but she may still not be clear as to what you exactly want.

I think she was giving partial answers in order to NOT be adversarial, as she may not have had time to pull all that together and did not want to ignore the inquiry. OK - ? possible?
yes, her son got a cut rate place to live. Is that worth a family feud? It was a family member. She wasn't collecting rent and pocketing money. You could state a case that sister owes her "rental" income, I wouldn't go down that road. that is why the 3rd brother wants out of the whole thing. and she should too.


Just had meeting with SIL and Brother. While we all agree she should be more transparent about the LLC and we should have, at the very least on an annual basis, been apprised of our interests, we are going to give her the benefit of the doubt, for now.

She indicated she didn't have time right now, but remembering she is a CPA, we should know she really is very busy right now with tax deadlines looming and she has been known to have three jobs at the same time. This is not really out of character.

Secondly, we decided we should be more clear about what information we want to know, why we want to know it, ask some general questions about taxes and then ask when she thinks she could provide that information.

So yes, a couple of steps back, take a breather and try again. If that doesn't produce results we will go from there, but Brother seems to think there is no reason to panic, yet.

klucich,

I'm losing track of where this is going. Help me will ya? How would you like to see this end? If you received a check for some amount, would that do it for ya? How much?

Since you've had a free ride for the past decade with sis managing the property, are you willing to concede some/most of the intervening increase in value? If not, would you be willing to roll up your sleeves and assume responsibility for the property going forward?

I sense you don't want active involvement. I also sense you aren't looking to screw your sister out of money she's put into improving the property or sweat equity her or your nephew have invested. You need to think of what you want out of this that will satisfy you and work towards achieving that end. I would suggest 50% of the original house value when you inherited it and let the intervening decade go........

I really support your brother's position. And, if you can afford it, you would likely be well represented by a similar outlook. The time to act was years ago. Accepting a payoff that recognizes you as an heir but fully recognizes your sisters decade of managing the place, investing in it and contributing sweat equity should be considered.

Get out of any involvement with the house. Accept a payoff that makes sister feel like her decade of handling things has paid off (if reasonable) if you can afford it. Don't construct a situation that leads to ugly family discourse over the balance of your lives unless you feel the financial payoff is worth it.

Get this behind you!

 

[pb4uski]

While Sis has managed the property for a decade, she has also had any benefit of having posession of the property for the past decade... the main one being cut rate rent for her son.

It sounds like there is no much of a relationship with Sis or Bro to be concerned about.

To accept your proportional interest (1/3 or 1/2 as the case may be) of the value of the property a decade ago is IMO foolish.... especially in these circumstances where the property had greatly appreciated over that period. At the same time I agree that Sis needs to be treated equitably, especially for any sweat equity.

 

[Camas Lilly]

I understand what you are saying, but the original funds that were invested into rehabbing the home were mother's and all funds were pooled to make that happen. Sister wanted to be in charge and took it upon herself to hire a contractor to do the rehabbing and didn't want any help with the job. When she got ripped off by contractor/friend, we told her any one of us could have made that mistake and not to worry about it. Just let us know what she needed to finish the job. That wasn't right in her opinion and to set things right with mother, she needed to make up for her misfortune herself or she wouldn't feel right any other way. So we basically just let her take her time to finish what needed to be done. There really wasn't much else we could do. That took 5 years

She wanted to keep the home as a rental and had people "lined up" to rent it. Well, nephew moved in 5 years ago and was going to pay a "reduced rent". It was our assumption this was helping her re-coup some of her costs so we just let it go until I piped up and started asking how things were going. It was only then we found out, she really wasn't collecting any rent, and in fact, was helping support nephew. My opinion here is not like mom doesn't have two vacant bedrooms at home, so something could have been done. But she also should have been more transparent about what was going on with the rest of us.

I am not looking to walk away with a lot of money, but some capital right now or even into next year would allow me to go ahead and retire and join hubby who has been retired 5 years now. It was certainly a relief to find out taxes are up to date and everything as it should be on the Assessors web site, so we'll just see how it goes from here.

I also do not expect she will want to negotiate for anything but an equal share so I'm not too concerned there, but I could be wrong.

 

[jazz4cash]

Lots of twists and turns here. Did OP change user name? Good luck with this.

 

[Camas Lilly]

Lots of twists and turns here. Did OP change user name? Good luck with this.

Yea, I thought that might be a good idea since some are asking where I get this info. Thanks.

 

[troutnut1]

Imputed interest-Ouch!

Unless you want to find out what it is like to pay taxes on interest you never received, google “imputed interest rate”.

The IRS can calculate and bill you for taxes on a rate they assign as being “market rate” when you do a family deal like that at below market rates. Basically, they will make you pay taxes on imaginary interest you never got.

Also, as a long time appraiser, I should mention that it is not uncommon to have an appraiser determine the values of the home in the past as well as the present. It’s called a retrospective appraisal. This might help in the negotiations as well as in any tax matters.

Some people try and use other appraisals (like tax appraisals) in place of fee appraisals. While this might save a few bucks, it is often a very bad idea. Appraisals are really only meant for the specific purpose that it was done for, and as of a date specified in the appraisal. Tax appraisals are usually low. Refinance appraisals are often low. As when you are calculating gain, it would be best to have them high.

Good luck. I call what you are doing an “Einstein Deal” (Theory of Relativity). Family makes everything twice as hard.

 

[Camas Lilly]

Unless you want to find out what it is like to pay taxes on interest you never received, google “imputed interest rate”.

The IRS can calculate and bill you for taxes on a rate they assign as being “market rate” when you do a family deal like that at below market rates. Basically, they will make you pay taxes on imaginary interest you never got.

Also, as a long time appraiser, I should mention that it is not uncommon to have an appraiser determine the values of the home in the past as well as the present. It’s called a retrospective appraisal. This might help in the negotiations as well as in any tax matters.

Some people try and use other appraisals (like tax appraisals) in place of fee appraisals. While this might save a few bucks, it is often a very bad idea. Appraisals are really only meant for the specific purpose that it was done for, and as of a date specified in the appraisal. Tax appraisals are usually low. Refinance appraisals are often low. As when you are calculating gain, it would be best to have them high.

Good luck. I call what you are doing an “Einstein Deal” (Theory of Relativity). Family makes everything twice as hard.

Interesting. Thanks for the info.

 

[deserat]

Seriously, I agree with many here. You are trying to secure some concrete information/access to your inheritance while at the same time allowing your sister to save face.

You could be honest with her: you are trying to secure your financial interests before retiring and therefore need too have closure on this particular asset/situation.

We are all busy; it seems evident she has taken advantage of a shared asset to alleviate some of her personal issues (i.e. her son's roof). Nevertheless, you also have some personal issues you would like to be able to alleviate, namely, your financial situation and options as you move into a large life transition. You've been understanding, so it is now time for her to be understanding.

Your sister sounds like she was doing the best she could to balance many competing interests. You might appeal to that and then say you think it will be simpler for all if the three way mechanism is concluded with her ending up with the asset and paying you all for your interests in said asset.

I like the poster who gave you the five options or steps with regard to your actions. I would also give some deadlines for yourself and her response to each of those actions if you have to move through all of them. You aren't getting any younger and your retirement is getting closer. You need to be able to finalize your financial situation. By going through those steps you are acknowledging her efforts over the years and allowing her to be able to still manage her personal issues.

As with any family situation like this, lower your expectations on exactly what you might get out of it. Also realize that as you ratchet up the pressure and use third parties (lawyers, etc), that will also cost more and may affect the final amount you do get. All of this must be done based on 3rd party neutral information. I would get the appraisal and have it tiered by each year (i.e., what it was the first year, second, year, etc - should be easy as I'm sure they've got that down to a percentage calculation). Use that as you move forward.

I don't remember what you exactly needed to meet your number (as this thread started with the "should I take SS early" question). If you get a stepped up basis of six figures, would that help your bridge situation so that you wouldn't require early SS? Find out what that bridge number is and see if you are able to negotiate that as your settlement. I would use that as your negotiated floor amount if possible (and it is within the range received from the appraisal).

 

[pompanobeach]

I agree with PB4USKI. Sell her your shares in LLC. Also, by law you can force the sale unless you waived that right in the partnership agreement or something. In any event, you can bring her to court and get your equity.

Also, I hope you are benefiting from the tax depreciation of the real estate every year.

 

[deserat]

.....

I don't remember what you exactly needed to meet your number (as this thread started with the "should I take SS early" question). If you get a stepped up basis of six figures, would that help your bridge situation so that you wouldn't require early SS? Find out what that bridge number is and see if you are able to negotiate that as your settlement. I would use that as your negotiated floor amount if possible (and it is within the range received from the appraisal).

Just relooked at your first post and the numbers - your total amount to meet 6.5 years of your yearly extra is about ~$88k; you say your interest in house may be $137K - a split the difference would be ~$112K.

I would ask for the full interest amount from your sister ($137K) and then have $112K as last negotiating position. These numbers could be adjusted when the appraisals come in. In any case, you only need $90K to meet your objective to retire next year and walk away with the money you need and this situation....

Once lawyers (love the Junkyard Dog reference, OldShooter ), etc, get involved, I would add 10-15% costs or more to solve this issue. Based on her reply of "what do you want and when," it seems like she also wants to possibly solve this, maybe not as quickly as you wish (hence putting some deadlines on responses).

I speak from hard learned experience.......ended up in federal court over a much smaller amount. Lawyers took a lot of it.....

 

[Camas Lilly]

Now I'm confused. Does your brother actually have an ownership in this home?

If not why is he even involved at this point? I have a sister like this too. I have to think of six different way to phrase a simple question so I don't risk offending her or setting her off. If she brusque or unresponsive I'm supposed to wrack my brain and see if I said something wrong or am putting too much pressure on her.

You do understand that a grown woman could type the words.. I'm really busy with the extended tax season right now, can I get back to you after July 15?

She apparently has asked what YOU want to happen with this house...even after reading 4 pages here I can't figure out what you really want. I know for sure you are apprehensive about offending your sister, while you are waiting to recontact sister it might benefit you personally to put your wishes in writing to share with her at that time.

As I said you have my sympathy cause these patterns are lifelong and hard to break..deep down you probably know it won't be easy or pretty to make something happen but I wish you the best.

LOL, thanks and you do have some good points. When I first asked, I was more curious about what was going on and didn't really know exactly what I wanted until I knew a little more. Yes, brother has 1/3 interest but wants out with nothing, letting us two split the rest.

After learning a little more and what my options might be, I have decided I do want to be bought out. The money that I would get would enable us to go ahead and proceed with a move across country, invest the rest and we retire with a comfortable budget. Budget was tight to start with, and this would give is a little comfort zone. We live happily ever after.

Without, we cut costs as planned on the new house build (nixed a basement and garage - large shop instead) and be ~$75,000 in debt by the time all is said and done. We still probably would not add the basement back in but maybe a cellar and a carport. Needs to happen and we are going through with regardless. We will figure it out.

I composed another e-mail and, with approval of Brother, sent it on and did finally receive an acceptable response. I know she is busy, but as you said, sister should have at least sent some kind of understandable response.

I have to finish XXXX taxes and then I can work on the information for you. Doing the best I can. Please give me a couple of weeks. After I get the info to you, I will see an attorney to see what our options are to reorganize or dissolve the llc as Brother had suggested.

I was trying not to create any hardships for sister and I still don't know, but It appears we may have a happy ending.

 

[nwsteve]

I encourage you to set a date certain (e.g. by end of July) for when she expects to complete the taxes--July 15, 2020 or ? This clarity will allow you to set your reminders and go on to other things not to mention, more clearly establish some performance guideline for action by your sister. It also makes it more clear you are expecting action not more promise. Five years and counting is already plenty of time

 

[ivinsfan]

LOL, thanks and you do have some good points. When I first asked, I was more curious about what was going on and didn't really know exactly what I wanted until I knew a little more. Yes, brother has 1/3 interest but wants out with nothing, letting us two split the rest.

After learning a little more and what my options might be, I have decided I do want to be bought out. The money that I would get would enable us to go ahead and proceed with a move across country, invest the rest and we retire with a comfortable budget. Budget was tight to start with, and this would give is a little comfort zone. We live happily ever after.

Without, we cut costs as planned on the new house build (nixed a basement and garage - large shop instead) and be ~$75,000 in debt by the time all is said and done. We still probably would not add the basement back in but maybe a cellar and a carport. Needs to happen and we are going through with regardless. We will figure it out.

I composed another e-mail and, with approval of Brother, sent it on and did finally receive an acceptable response. I know she is busy, but as you said, sister should have at least sent some kind of understandable response.

I have to finish XXXX taxes and then I can work on the information for you. Doing the best I can. Please give me a couple of weeks. After I get the info to you, I will see an attorney to see what our options are to reorganize or dissolve the llc as Brother had suggested.

I was trying not to create any hardships for sister and I still don't know, but It appears we may have a happy ending.

This is some progress and glad you are thinking about yourself and your needs as well as your sister's needs. The reasons you listed for wanting money to retire on are valid and important so take it from there and good luck...

 

[Camas Lilly]

This is some progress and glad you are thinking about yourself and your needs as well as your sister's needs. The reasons you listed for wanting money to retire on are valid and important so take it from there and good luck...

Thank you.