Odd situation; unknown inherited property

[1oddmanout]

Father remarried, then passed away 2002. House was in both names, but father's will said ownership is half second wife, half to be split between 3. We all assumed this meant whenever house was sold. Found out at sale in 2/2022, that ownership was transferred (but not on deed) at time of decease. 

All I read about capital gains is for residence - none of three lived there.

Also, county tax doesn't have records of house assessment in 2002. house sold for 175K, I think value was 125K in 2002.

I don't know how to report this.

[rjs]

I don't know how ownership could be transferred if the deed wasn't changed. I think you need to consult a lawyer to determine whether ownership was legally transferred in 2002, and who were the actual owners of the house at the time of the sale in 2022. Until you have that information, we can't tell you how to report the sale on your tax return, or even whether you have to report it at all.

You omitted some important details, but none of this really matters until you clarify the ownership. Was your father's second wife still living when the house was sold in 2022? If not, when did she pass, and what was done with her share of the house when she passed? You may need to contact her executor or the lawyer who handled her estate.

And who are the "three"?

[1oddmanout]

Thanks for the rapid response.

Per title company, deed doesn't have to change until sale, 2nd wife living in home until sale. 2nd wife still alive, just that she sold the home, and this all came out at closing.

3 brothers.

There's no personal issues, we just don't know how to report; cap gains or plain inheritance.

[Mike9241]

most likely you can forget about the title company.  generally, there is a county or some other local governmental office where the deed must to recorded to be legally enforceable.  usually, the office is the recorder of deeds but the name can vary. 

[rjs · Accepted solution]

If the title company is right, it sounds to me like you inherited a 1/6 share of the house from your father when he passed in 2002 (1/3 of the half that you split with your brothers).

Mike9241 thinks the title company might not be right. But it sounds like the sale has already closed, and you were treated as a 1/6 owner, whether that's right or not, and you received 1/6 of the proceeds from the sale. The simplest thing for you to do is go along with the way the sale was treated, whether it's right or not. Your basis is 1/6 of the fair market value on the date of your father's death. Even if you had the property tax assessment, it's not a reliable source for the fair market value. And of course you cannot rely at all on what you think the value was. A professional appraiser can give you a retroactive appraisal. Your brothers and stepmother will need it too.

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@1oddmanout wrote:

There's no personal issues, we just don't know how to report; cap gains or plain inheritance.

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It's not a "plain inheritance." You didn't inherit anything in 2022. Nobody died in 2022. Either you inherited your share in 2002, or you never inherited anything at all. If you did inherit it in 2002, it's a sale of an inherited asset, and the profit is a capital gain.

If it's a capital gain, you report it in TurboTax as an investment sale, like selling stock. It will be a long-term capital gain. For the date acquired you can enter "Inherited" instead of the actual date. For the description you can enter "Inherited house."