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Quit Claim Deed - Inherited Home

My mother created a quit claim deed on July 31, 2006 for her home. It states in the paperwork "that you transferred her residence to your children, subject to your 'life estate'. As you may recall, the life estate guarantees you the ownership of the property during your lifetime." Then goes on to say "Your children will take over the property upon your death." "This transfer is considered a gift to your children." She completed form 709 in 2007.

 

It had my 4 siblings along with my mother listed on the QCD . My mother lived in the home until she passed away in Dec. 2022. We inherited the property upon her death Dec 2022.  We sold the house in August 2023. Each of us receiving 1/5 of the sale price. My mother's amount went into her probate account. My siblings and I each received a check for $38,000.

 

1. When it asks 'How did you receive this investment? do I enter 'I received it as a gift' or 'I inherited it'?

2. Under 'Date acquired by previous owner' Do I enter 'on one date' the date my father passed away and she became sole owner? if not, what date gets entered?

3. Date sold or disposed? We entered the date we sold the property 8/4/2023

4. Proceeds. We entered the amount of our check from the Title company indicated on the 1099-S.  $38,000

5. Previous owner's cost basis. This is where we are stuck. What gets entered here?

 

I click continue and it asks 

"Let us know if any of these situations apply to this sale.'

I clicked the box 'I paid sales expenses that aren't included in the sale proceeds reported on the form' Sales expenses not reported I entered $3,574. which is a total of the closing costs divided by 5 (mom + 4 kids).

 

When I review the Re/Max Excel Sales page it shows

Description: Real Estate

Date sold: 8/4/2023

Sales section: Long-term (box F)

Proceeds: $38,000

Cost basis: $38,000

Gain/loss: -$3,574

 

I am trying to figure out if this is entered the same way whether it was inherited or a gift. Turbo Tax calculates it the same. But I am wondering if I entered the Cost basis amount correct or not.

Please help

Thanks

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3 Best answer

Accepted Solutions
M-MTax
Level 10

Quit Claim Deed - Inherited Home

The gift was made when your mother transferred the remainder to you and your siblings. You got your remainder and owned the whole property when she passed by operation of law ----- the L/E ended. Your basis is FMV on the date of her passing and your holding period is long term. It should be entered as an inheritance so you get the right holding period --- long term.

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Quit Claim Deed - Inherited Home

Would the FMV be divided by 5, because I only owned 1/5?

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Cynthiad66
Employee Tax Expert

Quit Claim Deed - Inherited Home

Yes it should be divided by 5 or 20%.

 

 

@rdw1095 

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3 Replies
M-MTax
Level 10

Quit Claim Deed - Inherited Home

The gift was made when your mother transferred the remainder to you and your siblings. You got your remainder and owned the whole property when she passed by operation of law ----- the L/E ended. Your basis is FMV on the date of her passing and your holding period is long term. It should be entered as an inheritance so you get the right holding period --- long term.

Quit Claim Deed - Inherited Home

Would the FMV be divided by 5, because I only owned 1/5?

Cynthiad66
Employee Tax Expert

Quit Claim Deed - Inherited Home

Yes it should be divided by 5 or 20%.

 

 

@rdw1095 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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