My wife and I file joint returns, and we have a complicated tax matter regarding the sale of her deceased mother’s home in 2021. My wife has 5 siblings. The eldest sibling… we’ll call him “Jack”… moved back home with their mother ~20 years ago. Apparently he paid their mother rent at first but stopped at some unknown point. The mortgage had already been paid in full, but he still collected money from all the siblings for real estate taxes and occasional home-related expenses. Several years later their mother’s health declined, and Jack said she needed to be put into a nursing home. The siblings learned that if the house were put in the name of a primary caregiver living in the house, then the nursing home couldn't go after the house for payment; thus the family all agreed that the house would then be sold for $1 to Jack, and the deed put entirely in Jack’s name. It was mutually understood that when Mom passed away the house would be sold, and the proceeds divided equally among the siblings. If there ever was a will, it was presumably never found. Not long afterwards, about a decade ago, their mother passed away. Jack would not leave the house, and the siblings started losing their patience. They stopped paying Jack for real estate taxes, because now he was living there alone rent-free. Jack eventually argued that if and when he sold the house, then he should get twice the others’ shares because he’d been the one burdened with caring for their mother prior to her entering the nursing home. Meanwhile the house was falling into disrepair and losing value, and Jack, who had very limited means, had begun borrowing against the home’s value and living off it unbeknownst to his siblings. When they discovered this they sued him, and after a couple more years the case was eventually settled out of court. The house was to be put up for sale within 60 days, all siblings would pay for the necessary repairs to ready the house for sale, and Jack would get not quite twice as much, but still a greater share of the proceeds than each of his siblings. He would have to pay off what he borrowed against the house with his own share. The house was sold in 2021. Jack’s name was the only name on the deed at the time of sale. Jack’s attorney in the sibling suit received the sale proceeds, then wrote a check to his siblings’ attorney for the sum total of their shares. Their attorney then wrote checks to each of them (my wife included). Jack said he did not receive a 1099-S, nor did my wife, nor the rest of her siblings. How would the IRS treat the capital gains from this sale? And who would they assume is responsible for capital gains taxes - Jack whose name was on the deed and signed all closing docs, or all siblings who received a portion of the proceeds?
