Sale of a second home

[seich1776]

I'm using Turbo Deluxe. I have my own home and my mom signed over her home to me back in 2003. she remained living in the house until she passed away last year. The home at that time was $80,000 and I sold it for $112,000 minus taxes and fee that occurred when I sold it coming to $88,000. Do I claim this as capital gain? Where in turbo tax do I put this?  Or do I even claim this?  I also did not receive any forms in the mail like a 1099B or 1099 S.

[ColeenD3]

You qualify for the exclusion, assuming you meet the rules below. However, your basis in the home is not the Fair Market Value at the time of the gift, but the adjusted basis. This is the amount you mother purchased it for, plus the cost of any improvements. You would contrast that amount to the sales price, minus closing costs.

Does Your Home Sale Qualify for Maximum Exclusion

The tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home. To qualify for these breaks, your home must meet the Eligibility Test , which is explained later.

How your sale qualifies.   Your sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if all of the following requirements are met.

• You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.
• You didn’t acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.
• You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude

Reporting Gain or Loss on Your Home Sale

Determine whether you need to report the gain from your home.   You need to report the gain if ANY of the following is true.

• You have taxable gain on your home sale (or on the residential portion of your property if you made separate calculations for home and business) and don’t qualify to exclude.
• You received a Form 1099-S. If so, you must report the sale even if you have no taxable gain to report.
• You wish to report your gain as a taxable gain even though some or all of it is eligible for exclusion. You may wish to do this if, for example, you plan to sell another property that qualifies as a home within the next two years, and that property is likely to have a larger gain. If you choose to report, rather than exclude, your taxable gain, you can go back later and undo that choice by filing an amended return, but only within 3 calendar years after the year of sale.

  If NONE of the three bullets above is true, you don’t need to report your home sale on your tax return.

[AmeliesUncle]

Because your mom lived in it and essentially had full use and benefit of the home the entire time, this sounds like a "Life Estate".

That would mean the house gets a "step up" in Basis, which means your 'purchase' price is the Fair Market Value on the date of her death.

There is a section to sell investment items, such as Stocks, Bonds, etc.  The sale of the home will be entered in that section.

[ColeenD3]

You have to determine if her intention was a Life Estate, or you just allowed your mother to live with you.

What Is A Life Estate?

A life estate is something to consider during estate planning. When an owner of a home signs a life estate, they are in effect passing part of the ownership of a home to another person. This could be thought of as a way to pre-gift your home to your heirs while still retaining joint ownership.

Life Estate Deed

A life estate deed permits the property owner to have full use of their property until their death, at which point the ownership of the property is automatically transferred to the beneficiary.

[AmeliesUncle]

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@seich1776 wrote:

I have my own home and my mom signed over her home to me 

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Colleen, maybe I'm misreading it, but I read it as the OP has one home, the mom has a separate home.

[ColeenD3]

Yes, @ AmeliesUncle, you are correct. I was the one who misread (more than once).

[seich1776]

my mom signed over complete ownership of the house to me back in 2003. It wasn't an investment deal. She stay living in the home by herself until she passed away. I sold the house. Is there capital gains on the house for tax purposes.  can I file taxes using turbo deluxe or do I have to go to Premier.

[KrisD15]

This should be reviewed with a real estate attorney of the state where the property was located. 

Types of Deeds and methods of transfers are governed by the states. You'll need to understand what "Signed Over Complete Ownership" means in order to determine your basis.

Your "basis" (or what the property was worth when you obtained it), could be the value on the day the deed transferred OR the value at time of passing. 

You should receive a 1099-S for the sale of the house. You will enter that form and answer the following interview questions so that TurboTax knows how to report the sale.

You can use TurboTax Deluxe, but the software will not be able to determine your basis. You will need to get that answered first. 

About Life Estates

TurboTax answer regarding an inherited house

TurboTax explains Basis

[Edited 02/09/2021 | 12:35 PM PST ]

@seich1776