My father-in-law (FIL) died in 2015. My mother-in-law (MIL) is still living and has severe dementia but remains living in their home with aides and receives nothing but social security. Other than filing an IRS form to show his death, MIL hasn't filed ANY paperwork to clear FIL from anything. Though he died with a will, everything reverted to her and in her belief, that-was-that so there has been no probate.
In 2018 while trying to file a transfer on death, the deed was found to have a legal description error. Three of the four people that had signed at the purchase are dead so a quit claim deed assigning the property to my husband was the only means of clearing the title. There is no mortgage, MIL continues to pay the taxes and MIL has a lifetime estate. When she dies husband is selling the house. There is a more than double increase in the property value.
1) Upon future sale, is this a correction to the deed or a capital gains or a gift?
2) Since MIL didn't file any forms in 2018, are we required to go back and correct something for 2018?
3) Would it help if he lived in the home for two years before putting it up for sale to use an exclusion?
4) If it is a correction, do we put anything on our 1040 form or ignore quitclaim and use her date of death as basis?
