Income tax reporting and taxes of inheritance of sale of house

Asked about 4 years ago - Austin, TX

My dad passed in 2008 living in another state. House was sold in 2009 after some renovations done. Received 1099S from sale of house. Proceeds from sale of house were divided between 3 of us. How do I figure how much I will owe tax wise? Don't have good information from the executor. What do I need so I can file my taxes.

Attorney answers (3)

  1. Steven J. Fromm

    Contributor Level 20

    3

    Lawyers agree

    Answered . The basis of the house is stepped up to the date of death value for purposes of calculating gain or loss. You should have received a copy of the inheritance tax return that included the house at its fair market value (FMV) at date of death. You take that FMV and any other improvement made to the house after the date of death and divide it by 3. That is your basis for calculating gain or loss on the sale for each of you. Then report this gain on your Schedule D of your Form 1040.

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  2. John J. Sullivan

    Contributor Level 14

    3

    Lawyers agree

    Answered . If you received the Form 1099-S personally, with your siblings, then the house must have been distributed from the estate. Otherwise the estate would have received it and reported the sale on its Form 1041 return.

    As my colleague correctly points out, the basis in the house was adjusted (up or down) to the fair market value on your dad's date of death. If the estate did not have to file an estate tax return it might not have performed a certified appraisal. However, an executor is remiss for not at least obtaining a CMA (comparative market analysis) from a competent local realtor. If that was not done you and your siblings should obtain one from a local realtor as of the date of death. You split the new basis and the proceeds/gain (if any) on an equal basis.

    I assume none of you lived in it and it was not rented out following your father's death (so no depreciation recapture).

  3. Mark L Rosenberg

    Contributor Level 15

    3

    Lawyers agree

    Answered . You should get a copy of the report from the executor for your files. Mr. Fromm's advice about the taxable proceeds is correct. Make sure that you distinguish between renovation expenses (things that increased the value of the house and may be added to basis) and mere repairs, which do not increase the basis.

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