Inhertiance beneficiaries and tax deductions

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bobsmith
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Joined: Thu Jan 24, 2013 4:02 pm

Inhertiance beneficiaries and tax deductions

Post by bobsmith » Sun Mar 11, 2018 1:42 pm

I'm trying to help out a family friend who recently lost his father, his last living parent. They sold most the stuff at the estate sale and are in the process of passing everything down to the heirs. My friend, Roger, and his sister are the only beneficiaries. They have donated some stuff to goodwill such as clothing and medical equipment. For this the "estate" has some donation receipts which all together total about $2,000. When filing their taxes, it's my understanding that both Roger and his sister could split those donations such that they could each take advantage of an additional $1,000 in deductions using the itemized deduction method. However, $1,000 more in deductions doesn't help his sister because even with the $1,000 she's still better off doing the standard deduction. Roger, however, is using the itemized deduction method. My question is, can Roger use the full $2,000 for himself or, because he is only 1 of 2 beneficiaries, can he only claim up to half ($1,000). If so, can Roger deduct the full $2,000 while still getting a true half of all the actual assets?

Gill
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Re: Inhertiance beneficiaries and tax deductions

Post by Gill » Sun Mar 11, 2018 1:51 pm

Yes, it would seem to me they could work out an arrangement where Roger's sister gives or assigns to him all the personal property being given to charity and then he could deduct the full amount.
Gill

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CAsage
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Re: Inhertiance beneficiaries and tax deductions

Post by CAsage » Sun Mar 11, 2018 1:55 pm

When my mother passed, I donated massive carloads of clothing, household goods, furniture (ok, they picked that up), luggage, etc etc. I took 100% of the tax deduction for those items, despite splitting the cash estate with my out-of-state sibling. After all, I did all the work....

Note that those household goods belong to either one of you, and you could easily choose to give the deduction to one sibling and not the other. Should anyone care, I would simply state that Dad left all the household effects to Roger who then donated them. No one will ever check.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

bobsmith
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Re: Inhertiance beneficiaries and tax deductions

Post by bobsmith » Tue Mar 13, 2018 1:32 pm

Gill wrote:
Sun Mar 11, 2018 1:51 pm
Yes, it would seem to me they could work out an arrangement where Roger's sister gives or assigns to him all the personal property being given to charity and then he could deduct the full amount.
Gill
Thanks to you and CAsage for your replies.

To be clear they already worked out what they thought was fair with regards to who got which items and they did so in a way that the both thought was fair and equal which stays true to the spirit of the will. It's not like Roger got more stuff which he then turned around and donated and his sister got less. But, in terms of a future audit, I suppose it could be laid out that way. For example, when it comes to possible future conversation with the IRS, Roger and his sister could explain that she got the HDTV and he got the items which he in turn donated.

Anyway, I get what you guys are saying. Sounds like I'm worrying over something that isn't something the IRS has a problem with.

Thanks for the advice.

MarkNYC
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Re: Inhertiance beneficiaries and tax deductions

Post by MarkNYC » Tue Mar 13, 2018 2:06 pm

bobsmith wrote:
Sun Mar 11, 2018 1:42 pm
My friend, Roger, and his sister are the only beneficiaries. They have donated some stuff to goodwill such as clothing and medical equipment. For this the "estate" has some donation receipts which all together total about $2,000. When filing their taxes, it's my understanding that both Roger and his sister could split those donations such that they could each take advantage of an additional $1,000 in deductions using the itemized deduction method. However, $1,000 more in deductions doesn't help his sister because even with the $1,000 she's still better off doing the standard deduction. Roger, however, is using the itemized deduction method. My question is, can Roger use the full $2,000 for himself or, because he is only 1 of 2 beneficiaries, can he only claim up to half ($1,000).
A charitable deduction requires a receipt in the taxpayer's name from the charitable organization. You say that "the estate has some donation receipts." If the receipts are in the name of the estate rather than the name of the individual beneficiary, then the individual might have some difficulty substantiating the deduction on their personal return, although this is not something the IRS scrutinizes very often.

If the will said the personal property goes to the individual beneficiaries, then the charitable donations of the personal property should have been from the individuals not from the estate.

bobsmith
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Re: Inhertiance beneficiaries and tax deductions

Post by bobsmith » Wed Mar 14, 2018 2:49 pm

Mark,

I believe in this case they have a few receipts that are essentially blank and given to Roger by the places they donated to. It's left to him to fill in the value. As I understand it when the receipt shows a value of $300 or less (or maybe $250 or less depending upon where I read about this) then it doesn't need to be overly detailed or itemized. In the cases where items were donated, the actual value they could have gotten from some place like Ebay probably far exceeds what they actually claim as a donation value. Donating to places that helped people in need was the primary motivation. I can certainly say this is true for some of the medical equipment they donated.

You raise a good point, but I don't think I'm going to get a black and white answer on this topic. My impression is that the IRS is willing to allow for some rough math on these issues so long as no one is trying to abuse the spirit of the tax code.

thank you for the reply

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