I need guidance to correctly report the proceeds from the sale of a second home on my federal and state income tax returns. The home was my parents' home.
Many years ago my parents setup life estate quitclaim deeds for my two siblings and me on their long-time primary home in Wisconsin. In July 2022, my mother entered a nursing home. In February 2023, my father passed away. In December 2023, my siblings and I sold the home for $126,000. My mother, my siblings, and I each received proceeds from the sale--my mother received 37%; each of the three children received 21% (as determined by actuary tables provided by the State of Wisconsin). I received a Form 1099-S Proceeds from Real Estate Transaction.
It appears I need to report the proceeds as an investment that I sold. Assuming that is correct, I'm working through the questions in TurboTax.
"What type of investment did I sell?" "Second home" seems right.
"How did you receive this investment?" "I inherited it" seems like the right response.
QUESTION 1:
Which proceeds value do I enter in TurboTax? Should I report my 21% portion of the Gross proceeds, which was approximately $26,460 and was reported on the 1099-S form? Or should I enter my Net sale proceeds, which was approximately $24,870 paid out in the disbursement check that I received?
QUESTION 2:
I'm prompted to report the "Fair market value when previous owner passed away." In preparing to sell the house after my father's passing, my siblings and I received a $126,000 comparative market analysis value. Should I use that value? Is that value also considered to be the “cost basis from the sale”? Or do I need to somehow prorate this value to 21% to reflect my 21% portion of the interest in the property? After all, four persons effectively owned the house at the time of the sale.
QUESTION 3:
TurboTax asks if “I paid sales expenses that aren't included in the sale proceeds reported on the form.” While it’s true we did pay expenses in the form of express delivery/courier fees and other fees, those fees were subtracted from our gross proceeds to yield our net sale proceeds. Those fees were itemized on the sellers settlement statement. Therefore, I think the answer to the question is “no,” I didn’t pay any sales expenses that weren’t already subtracted from the proceeds. Does that sound right?
In case it matters, my siblings and I live in states other than Wisconsin.
Thank you.
