# Help! The IRS & Alzheimer's



## Marc Willis (Mar 4, 2014)

My 81 year old Mother (US citizen/UK resident for the last 45 years) was recently diagnosed with Alzheimer's. After a stay in hospital then a convalescence home, it became apparent that Mum would not be able to return to her house and that she would need round the clock care. 

Knowing it would be a wrench for Mum to leave her home for the last 33 years, my sister and I didn't stop looking until we found a residential care home that we thought would best suit Mum's needs. 

As she was unable to return home, we have put her house up for sale to fund care home costs. Mum bought her house (her only home) in 1980 for £55,000 and the current asking price is £550,000. My crude calculation, and rough understanding, is that Mum will have to pay the IRS around £80,000 before April 2015. This translates to about a year and a half's worth of care home bills.

Do the IRS charge a blanket rate on Capital Gains Tax or is there a different criteria for people in my Mother's position who have had to move out of their home but will continue to need substantial funds to pay for health care in the unforeseeable future?

If this is not possible, are there ways of offsetting such a chunk of money that we were all hoping would provide for Mum at a time when she needs it most?

Any advice would be greatly appreciated,

Many thanks,


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## fergie (Oct 4, 2010)

Marc Willis said:


> My 81 year old Mother (US citizen/UK resident for the last 45 years) was recently diagnosed with Alzheimer's. After a stay in hospital then a convalescence home, it became apparent that Mum would not be able to return to her house and that she would need round the clock care.
> 
> Knowing it would be a wrench for Mum to leave her home for the last 33 years, my sister and I didn't stop looking until we found a residential care home that we thought would best suit Mum's needs.
> 
> ...


I think in your predicament I would take legal advise quite soon, it is my understanding you need power of attorney to put a parents house up for sale, they may also be able to give you advise about the taxes etc.
I have copied and pasted an article i found, I was forced to sell home to pay parentsâ€™ care fees | UK | News | Daily Express
It is fairly recent, so may help to guide you in making the right decision.
Good luck with it all


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## Marc Willis (Mar 4, 2014)

Marc Willis said:


> My 81 year old Mother (US citizen/UK resident for the last 45 years) was recently diagnosed with Alzheimer's. After a stay in hospital then a convalescence home, it became apparent that Mum would not be able to return to her house and that she would need round the clock care.
> 
> Knowing it would be a wrench for Mum to leave her home for the last 33 years, my sister and I didn't stop looking until we found a residential care home that we thought would best suit Mum's needs.
> 
> ...


Thanks Fergie I will take a look. I forgot add in my original message, both my Sister and I are already Mum's Power of Attorneys.


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## Joppa (Sep 7, 2009)

There is no capital gains tax to pay on sale of principal private residence.


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## Marc Willis (Mar 4, 2014)

Thanks Joppa, but that's not what I've been told by two so-called US/UK tax specialists over the phone.


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## Joppa (Sep 7, 2009)

I don't know what her US tax liability is, but as far as UK tax law is concerned, selling your own private home doesn't generate a capital gains tax bill. It's different if she owns more than one homes and one is rented out, for example. I believe there is a similar exemption in US for private residence of up to $250,000. If the gain clearly exceeds it (as it appears to be the case), then US tax liability may arise.


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## Marc Willis (Mar 4, 2014)

Mum has never owned property in the US. Her UK residence (value £550,00) is her only residence. As I understand it, the first £250,000 on the sale of her house is exempt from U.S CGT but the remaining £300,000, U.S CGT is still calculated at 20% which is roughly £60,000 to the IRS. Do the IRS make any distinction in which a person has to leave their house, baring in mind they still have expensive medical bills to pay?


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## Joppa (Sep 7, 2009)

I don't know, You need to ask US tax expert. Try Expat Tax forum at Expat Tax - Expat Forum For People Moving Overseas And Living Abroad


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## fergie (Oct 4, 2010)

There must be a specialist lawyer who hopefully deals with these kind of cases about, one who deals with housing law rather than just house conveyancing. People with Alzheimer's can live for years after diagnosis, and nursing homes cost a hell of a lot of money. After all, if your mum could still look after herself she would be sitting in her asset- her home, the only difference I can see if it is sold her asset money will be in the bank to pay for her care instead, and that could be for a long time.
You have my sympathy dealing with Alzheimer's, my father had it and died many years after diagnosis, and my mother in law has it really badly.


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## expatgal (Mar 4, 2013)

Marc Willis said:


> Mum has never owned property in the US. Her UK residence (value £550,00) is her only residence. As I understand it, the first £250,000 on the sale of her house is exempt from U.S CGT but the remaining £300,000, U.S CGT is still calculated at 20% which is roughly £60,000 to the IRS. Do the IRS make any distinction in which a person has to leave their house, baring in mind they still have expensive medical bills to pay?


Don't forget deducting the original purchase price of the home, also, any and certain improvements she's made through the years. Receipts?
If she sells the home for 500,00, she will deduct the original purshase price of 50,000 + 250,000. Which may leave a capital gains of 200,000. She also has favorable deductions because of her age.
I say may, because there are always other expenses and deductions.
She must live in the home any two years out of the previous five years.
However, this is for living in the US, not sure how it will be for living in the UK.
Please check to seeif there is anything about having to sell for medical care.

For other US citizens living in the UK, and owning homes in the US.
If you're married, each gets to deduct 250,000 in capital gains. However, you must live in the home for any two years of the previous five years.
There isn't a limit to how many may own the home. Each may deduct up to 250,000.
Also, if you have the home in a revocable trusts, which must be recorded, the home at your death transfers to the one named in the revocable trusts, no tax liability!! You need to check it out.
Something else for the times we live in. The person named in the trusts, if the home is underwater at the time of your death, your loved one doesn't have to accept it. They sign a paper, and walk away from the home. There may be liability to the estate of the deceasd.

I believe in covering your ass....ts and tax liability.


I am sorry to hear of your mom's illness, may God bless her.


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## Nononymous (Jul 12, 2011)

I won't pretend to know the details of US capital gains tax on sale of a primary residence, but assuming it is this case that your mother would owe a bucket of money...

is not telling the IRS or otherwise refusing to comply a viable option at all?


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## BBCWatcher (Dec 28, 2012)

IRS Publication 523 describes the rules concerning sale of a home and U.S. tax treatment. Also please check the U.S.-U.K. tax treaty if U.S. tax is owed to see if there's any treaty relief offered.

Please also note that there's very favorable U.S. tax treatment for unreimbursed medical expenses which can offset any taxable gains. Also, make sure you calculate the gains as Publication 523 describes, using gains after costs, not the simple difference between the purchase price and the selling price. Net gains can be very different from that simple purchase/sale price difference.

Finally, if there is U.S. tax owed on the sale, please be careful that an estimated tax is paid if required. If an estimated tax payment is required, then that would move the deadline for payment sometime ahead of April 15, 2015 (or June 15, 2015 -- overseas residents get an extra two months if they attach a simple statement). I don't know the precise rules about whether an estimated tax payment is owed with a windfall like the sale of a home, but it's possible. If a timely estimated tax payment is not made then interest is charged. There's more information here from the IRS.


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## Bevdeforges (Nov 16, 2007)

I've moved your thread over here to the tax section to see what other advice you can get.

While there is no "special" provision for the situation you describe, there are a number of other things you can do. The first $250,000 of gain on your mother's house is exempt from income tax as long as she meets the requirements (mainly that it was her residence for 2 out of the last 5 years). Take a look at IRS publication 523 for the details Publication 523 (2013), Selling Your Home There are also tips about determining the basis for the house, including any improvements made over time and "fix up costs" incurred in order to sell.

The other things to look at are expenses that she can deduct related to her illness, which may include part of her residential care. Tax Topics - Topic 502 Medical and Dental Expenses 

And don't hesitate to contact the IRS office in London for help. The overseas IRS offices are actually very helpful (not always the case with the offices back in the US). Internal Revenue Service (IRS) | Embassy of the United States
Cheers,
Bev


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## Marc Willis (Mar 4, 2014)

Thank you Bev, I will make inroads in that direction. Cheers.


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## DavidMcKeegan (Aug 27, 2012)

One other thing to mention, and it may or may not work in your situation, is the qualified widow exclusion from capital gains. 

If a spouse dies, the widow can sell the property within two years and still receive the full capital gain exclusion (as if they were selling jointly). As such, if this happens to be the case for your mother, she would be able to exclude 500K from capital gains.

My best to your family.

David


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