@taxseason1958 wrote:
Could you please state why you edited the original answer and where it states full step up in basis at time of death ie FMV?
The situation is complex, and the topic you are posting to is probably a lot older than 2019—the date is likely the date it was migrated to the new board software, not the date of the question and answer.
The described situation is unclear because the original poster never provided certain key information. The tax consequences of this kind of transaction depend on exactly how it occurred, and there isn't enough information to give an authoritative answer. Not every question on this board has an accurate or useful answer, unfortunately.
Example 1. Mother gifts the home to the children "in fee simple." Each child owns half the home free and clear. Sister sells her half-interest to her brother for $22K. Brother sells the home. Brother's cost basis is the same as the mother's cost basis at the time of the gift, and brother owes capital gains tax on the entire gain. (Brother probably does not get a cost basis adjustment for "buying" half the house from his sister, unless $22K represented half the true fair market value at the time.)
Example 2. Mother modifies the deed to include the siblings as "joint tenants with right of survivorship." Because the children have no actual ownership rights as long as the mother is alive, the IRS considers they inherited the home and received a stepped-up cost basis (half the stepped up basis each). The sister then sold her half-interest for $22K. The brother's cost basis is at least equal to his basis (half the stepped-up value) plus the $22K he paid his sister. Depending on how you treat the transfer of ownership from sister to brother, it might also include a "gift of equity" which would carry with it the sister's cost basis--which would also be half the stepped-up value. So the brother's basis might be the full stepped up value.
It would also change things considerably if the brother lived in the home as his main home for at least 2 years before selling it.
The issue of the brother paying the sister $22K for her half also complicates things considerably. It would have been easier for the brother and sister to sell the home while co-owning, and split the proceeds. To really answer this particular situation, you would need to research the exact language and form of the deeds used when the mother transferred some kind of ownership interest to her children and when the sister transferred her interest to the brother
