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Financial Questions & Answers

Financial Questions & Answers

Question:

My mother-in-law and her four daughters were on a deed for the house where my mother-in-law lived. She passed away three years ago, and we finally got rid of the house for $20,000. Each daughter was given a 1099-S for $5,000. The sale went through a realtor. What are we allowed to deduct from this $5,000? I would appreciate any advice you can pass along. Thank you. - Fran

Answer:

Our best advice is to pull all your paperwork together and find a qualified CPA to help you answer the question. Generally speaking, a 1099-S normally shows the gross proceeds from the sale of a real estate transaction. In the situation you outline, the appropriate question seems to be whether or not there was a capital gain as the result of the sale. Typically, the cost basis on a transfer at death would be the value of the property on the date of the owner’s death.

However, it may be that your mother-in-law gifted some or all of the property to her daughters (by transferring in full or adding them to the title of the house) while she was still alive. With a gift, the cost basis remains that of the original owner. Depending on how things played out, there could be very little in terms of tax implications. But this seems like a good time to enlist the help of an expert.