We're assuming that, a few years ago, your mother put you on the deed of the home she already owned*. That was a gift. The usual rule, for a gift,
is that the recipient's basis is the giver's basis (what you mother paid for
it), not the FMV at the time of the gift. But there is an exception for the gift of her home, where she retained the
right to live there ("life estate"). (seehttp://www.njelderlawestateplanning.com/2010/02/articles/estate-and-inheritance-tax/life-estates-est... which
states in part "If you give away an asset and keep a life estate in that
asset..... the cost basis of the house is "stepped-up" to the value
of the house on date of death [IRC 2036]")
More info: http://www.law.cornell.edu/cfr/text/26/20.2036-1
*Your cost basis would be different if you, and your siblings, bought the property with her originally.
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Sale of Inherited Home
Sales of
real estate are usually reportable on your tax return, especially if a form
1099-S is issued. There will most likely be no capital gain and therefore
no tax, if the house was sold shortly after being inherited. Any capital gain would be on the difference between what the house was
worth on the date of the decedent's death (your "cost basis" as discussed above) and what the house
sold for. If you made any improvements, those
costs would be added to your cost basis in determining the capital gain or loss.
If the house sat vacant since being inherited, it was "investment property", and, you can deduct
the loss, if the house was sold at a loss.
If there was personal use, by you or your siblings, you are not allowed to deduct a capital loss
