OK, so in trying to answer this question, I ran into some information that my previous answer was wrong. Sorry about that. I need to ask for extra help, and you may also need to see an accountant.
@Hal_Al @rjs @TaxGuyBill
My mistake was that when the father died, the son got full ownership of the second 1/3 of the home, so the life estate is ended at that point.
To start with, the son owned 1/3 of the house in fee simple, if it was bought as a 3-way deal in 1999 and there was no life estate at the time. In 2011, the son obtained another 1/3 share under an implied life estate, making the son the "remainderman." When the father died, ownership transferred to the son, not the mother, so the mother does not get a stepped up basis. As of the date of the sale, the mother owns 1/3 of the home, and she should report on her tax return, 1/3 of the selling price and 1/3 of the basis and other adjustments. The mother does not need a 1099-S, she can report the sale without it (one is not always issued so it is not mandatory on the tax return.)
The son owns 2/3 of the home, 1/3 in fee simple and 1/3 as a remainderman. The son gets a stepped up basis on the 1/3 from the father (I think) but does not get a stepped up basis on the 1/3 he owned from 1999. The son can report the 1099-S on his tax return because it was issued with his SSN. Probably the best way to avoid IRS confusion is for the son to report the full amount of the 1099-S, and then report an inflated basis, so the capital gain comes out right.
As far as depreciation, I still think it goes with the house, meaning the mother pays 1/3 of the recapture and the son pays 2/3. But, I don't think it would cause harm if the son paid all the depreciation recapture, especially if it was due to rental activity from the son's tax return and business activity from the father's return.
