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Can I claim 100% of a rental property sold that I own partialy?

Hi, I own a rental property with 2 of my sisters. One of my sisters passed away in 2019. The proceeds (and tax papers) for the sale were divided between myself and the surviving sister. However, my surviving sister has never reported any of the rentals for this property (was always reported by myself and my passed sister). Can I and should I claim 100% of the sale for of this rental property in 2020?

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1 Reply
Carl
Level 15

Can I claim 100% of a rental property sold that I own partialy?

I am assuming the disposition of the deceased person's assets were handled legally (probably through probate) for distribution to you and your surviving sister. That being the case, your sister has 50% ownership in the property regardless of who reported all the rental income and expenses. If the property was sold, then your share of the sale is reported on your own tax return, while your sister's share is reported on hers.

Generally, each seller will receive a 1099-S (or possibly some other tax reporting document) from the lender or closing agent showing their share of the proceeds from the sale. Otherwise, if your SSN is on the 1099-S showing that you received "ALL" of the proceeds from the sale then this "generally" isn't a problem for you to report the entire transaction on your own tax return. I say "generally", because there very well could be mitigating factors (and there most likely are) that I'm not aware of. For example, your share of the cost basis is only 50%, thus your gain would be significantly higher.

Then there's the possibility that the surviving sister gifted you her 50%, meaning that she would have been required to file IRS Form 709-Gift Tax Return with the IRS. (She would have paid no taxes, but merely satisfied a legal reporting requirement.)

This "can" get complex if your state also taxes personal income, and even more complex if you live in a community property state and your surviving sister is married.

You may want to consider seeking legal advice in your local jurisdiction, just to cover all your bases here.

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