Very long story short... wife and her sister inherited a house back in 2012 upon the death of their mother. My wife had a DPOA from her mother and transferred the deed into both her and her sisters name. Due to the sibling not having a place to stay they agreed to have them live in the house.... fast forward and the house has been sold. I have a bad feeling I am going to get hosed on taxes... maybe someone can shed some light.
I am not sure that this matters or not, but the title company said that their was an issue with the DPOA and technically the deed was still in her moms name. So we had to hire an atty and push the property through probate and get the courts to bless a new superseding deed effective a few weeks ago (so ALL other documentation other than the original deed of purchase from the deceased was superseded). I see that the IRS has a Topic 703 Basis of Assets which states: The cost-basis figure is usually the fair market value when the estate owner dies or when the assets are transferred.
From the time of death until now, the sibling has been living in the house since they had nowhere to go. The house was appraised at 300k sold for 284k and both siblings after fees are receiving around 115k (less mortgage, etc.) .
Not sure where to start and should this be addressed next tax season, or immediately? I normally use the Business line of products, where do I enter this? The escrow company did say that they were filling out a 1099 S but also indicated that exemptions on living in the property etc. might apply. Help appreciated. Thanks.
