Get your taxes done using TurboTax

If your name is on the deed, you are the owner and you would report this on your tax return. You would report this as an investment property since you never lived in the apartment. I am not certain what you mean by the remainder interest exclusion.  if you are asking if you are eligible for the capital gains exclusion, the answer is no because you never lived in the house to claim the Section 121 Exclusion., which excludes capital gains in accordance with the ownership and use test rules.

It would be considered a long-term capital gain. The date acquired is the date when the ownership was gifted to you.  in this case, 1997. Since this property is sold for a gain, the basis for the property is the amount your parents paid for the property ($5000). You could estimate how much you spent on improvements and add this to the basis of the apartment.,

Another issue you might consider is that you may need to file a form 3520.  If your life estate became part of a foreign trust, you may have 3520 reporting requirements according to how this was structured when established. Please read this link for more information and look under the section, Who Must File. Look at sections 2 & 3 to see if this applies to you. 

Here is how to report the sale as an investment sale.

1. Go to federal
2. Wages and income
3. investment income
4. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
5. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
6. Since you did not receive a 1099-B, answer “no” to the 1099-B question
7. Choose type of investment you sold - select everything else
8. Some basic information:
   1. Description –  Usually the address of the property sold
   2. Sales Proceeds – Net proceeds from the sale (on 1099-S amount received for the property) Do not include closing costs here. Instead increase the basis by any allowable closing costs. Please refer to  IRS - figuring basis on property  for information about allowable closing costs.
   3. Date Sold – Date you sold the property (on 1099-S)
9. Tell us how you acquired the property - I received it as a gift
10. Next screen you will enter the date your parents bought it.
11. Complete the section.

Reach out if you have additional questions.