The sale price is $200,000. I believe this sale is a long-term capital gain distribution (>2 years) and my cost basis is $65,000 (Sibling 1). It is automatically long term cap gains due to it being inherited even if you sold it 1 day after death.
1. Does sibling 1 report the gross proceeds as $105,000 and subtract the $65,000 cost basis? Siblings 2 and 3 follow a similar process with their share. We do not know if a 1099 will be issued, but the form, if issued, will most likely show the total gross proceeds and not match the above split amounts. Each of you WILL get a 1099-S at closing reporting your portion of the gross sales price ... look for it in the mass of papers you will walk away with. Then when you complete the tax return you get to enter the cost basis to offset the sales price to net the gain.
2. Does sibling 1 (non-resident of NC) have to file an NC state income tax return? Yes... you have a NC sale and NC will require a return for the NC income.
3. Are the utilities and other expenses considered part of the cost basis? Holding costs are not added into basis unless you had made the election to capitalize them on the prior year/current year return.
4. Is a termite inspection and treatment part of the cost basis if the title company requires the work prior to closing? If this was part of the closing costs reported then you will each take your % of them on your return ... it is added to the basis.
Simplest formula :
Cost basis = inherited cost + improvements + capitalized costs + cost to sell
Sales price - cost basis = long term cap gains or loss
May I suggest one of you employ a local tax professional to be educated on what is needed and how to do it then share the info with the others.
