their 1099-S may reflect net cash (buyout price less their share of the mortgage and closing costs) but for tax purposes they need to report their share of the gross sales price and closing costs. mortgages do not affect these items. so they'll be reporting more than received which should not be a problem. the institution would have to mail in the 1099-S with a clarifying statement. my hunch is the clerk entering the 1099-S info will just toss the statement. it won't hurt to send it. since you and your mother are the purchasers you don't get a 1099-S.
