When my parents moved into a retirement apartment they had to put up a large deposit on the place. My father passed away last year, my mother passed away over a decade ago, and now the retirement complex has refunded the deposit (minus various deductions).
Is this taxable or needs to be reported to the IRS? Or is it just considered a part of inheritance like a bank or brokerage account and as long as it doesn’t exceed any limits you are ok?
P.S. Topics have to be at least 15 characters? Hmmm. ok.
Remember, an estate tax return is a one time tax on the assets of the deceased. It has nothing to do with income.
Separately, an estate often has to file an income tax return to report and pay tax on the income the estate earns between the death and the time the assets are distributed to the heirs.
In this specific case, the deposit is an asset of richinaz’s father. Deposits like this are pretty common. If you rent an apartment, you’ll put up a security deposit. When you move out, you get your deposit back, less any damages to the property. That’s seems to be what has happened here. The deposit is larger because the facility charges not only for rent but all of the services they provide as well.
So it’s not a return of capital - the tenant/client isn’t investing in the facility. It’s not really prepaid rent. It’s a security deposit. At least according to the OP.
Thanks. I had this confirmed by my CPA (who actually works close by the retirement facility).
Its what I call a complete large campus with units being apartments. The facility has on site rehab centers where people temporarily live after getting out of the hospital to ensure they can live on their own. They also have an assisted living center where my mother spent much of her final year.
A large gym, movie theater, dining centers, etc. It was pretty nice although depressing in the sense that many there are older and people are always passing away. I kind of regret not spending more time up their with my parents. Often they came over to my place or we’d stop by and then take them out to lunch/dinner. I didn’t even realize they had a bar/lounge area until after my father passed away.
I think the way they refund the money was not good but I’m sure it was all in the contract. I just doubt my father even expected them to keep 3 months rent after the apartment was cleaned out and then take another $20K to fix it up.
Fortunately my father did his best to minimize estate issues for us and thankfully his time in the hospice was very brief (less than a week). Of course I wish he had recovered since he was fine mentally to the end, and unlike a lot of people, he didn’t have a typical (IMO) final illness (i.e., no heart attacks, cancers, strokes, ALS/MS/etc.) but just seemed to wear down and finally had congestive heart failure (I suppose that is a fatal illness?) and tired of the struggle and didn’t see a chance to get to a place where he could recover sufficiently.
I’m getting personal here but I really wished I still had my house here and I would have gladly moved him in with us and hired a nurse to help out. While it isn’t a pleasant thing to do, I would suggest everyone visit a hospice once, just to get a better perception on life and how things often end for many of us.