Do you have to report and inheritance to food stamps, SSI, or housing, or pay taxes on a capital loss?

Question

I know this family that does everything to cheat the system and basically it gets repulsing when your working two jobs trying to make a good life for your child. So anyways They live in the projects the husband is on SSI for his hurt knee, the wife doesn't work either. They have 4 kids and recently was pregnant again but lost the baby. The live off SSI, Foodstamps, and what ever else they can get for free, WIC, church donations excetra... Also even though they stay at home with their kids there pretty S****y parents, there children run loose, steal, and are very disrespectful! So anyways there grandmother passed away and left the wife a house, the house was condemed so they ended up selling the property and getting about $130 thousand. so when they went to the bank they cashed the check because they dont have a bank account, the bank ended up having to order money to cash the check and when the financial adviser was talking to them so they would understand that they could do alot

Answer 1

First of all, I have to guess this is the USA, right?  Other countries have different tax laws.

Generally, I think that inheritance is not taxable.  It's a gift from the grandmother to the grandkids.  Lets say that the house was worth $140 grand when she died, that is the value of the gift.  Then if they sell it for $130 G, it's a loss of $10 G.  There is no tax on a loss -- in fact, they might be able to use it to cancel out 10 G in income.

Being stupid is not a crime -- not even a tax crime.  And parents are under no obligation to help sent their kids to college.

Answer 2

Yeah, you should report them to the IRS. The government likes to watch, but it can't watch everyone.

My boyfriend inherited 5,000 from his stepdad and had to declare it on his taxes.

Answer 3

Yes you have to report inheritance money to the welfare office. They would have until the last day of the month following the month they received it to spend it down below $2000. If it has been longer than that and they still have $4000 then yes they are being fraudulent. You can call the welfare office and report them if you haven't done so already. And, no, it doesn't matter (unfortunately) what they spend the money on.  And you will be lucky if child protective services gets involved in a case like this unless there is more serious stuff going on.

Answer 4

That is really frustrating.  I remember being in that exact situation once.  When I was younger and my parents fell on hard times, we couldn't get enough food stamps and absolutely no other assistance because they had two cars (one was broken down and the other not worth $300).  Yet our neighbors had all brand new things like cars and such and lived off the system.  My parents worked extra hard and we were the ones that almost ended up homeless.  It isn't fair.

As for the inheritance, did the tax guy know they sold it?  You can't claim a total loss of you gained 130,000.  You would have had to claim the inheritance and what you got for it in addition to the loss.  It depends on how it was willed to them.  If there was a value on the house and willed to them for that value (regardless of current condition) then there is a loss.  But if it was inherited to them as a condemned property and they made a profit from it, then they would have to claim the 130,000.  It just depends on the circumstances and other documentation for the house.

Also, you can't inherit food stamps etc.  I don't think they did, but your initial question made it sound like they might have.  

As for the neglegiance of the kids, you can report them annonymously to family services.  Then family services can investigate the situation.  That is about all you can do in that regard.

As for the foodstamps and such, they would have had to claim the inheritance and should not have received services at that time or even now.  If it is not reported, they could face serious fines and maybe charges.

Answer 5

Yes, this will catch up to them. They are legally obligated to report an inheritance of any kind and any kind of property holding, including the home and car, to the public assistance agency, SSI, WIC, and any other agency that gives them financial assistance based on their financial need - and whoever handled their grandmother's estate was legally obligated to report the transfer of ownership.

You have two choices - you can stand back and let karma catch up with them, or you can help it along with a few anonymous phone calls. If you choose to help it along, begin by calling the church as they have the least amount of funds, and this family is hurting other families by taking assistance they don't need. Then call the food stamp abuse hotline [phone]. Below I have listed the Social Security fraud contact info. They have a hotline or an online report form. When you see the children stealing or running around unsupervised, report them to your local child protection hotline. Report only incidents you see first hand. To cap it off, though your calls to the food stamp and SSI abuse numbers should prompt an investigation, you could also call your state or county public assistance office. If they are found guilty of abuse or fraud, they will have to pay it all back, with interest and fines and possibly be disqualified from participating in the programs in the future. SSI and welfare should contact the IRS, which will look into whether they committed tax fraud.