I received a 1099-S for a house I did not own. I was on the title because I had loaned my son the down payment. The 1099-S gets sent to the IRS. How do I explain?

[garymange]

My son paid back the loan and I claimed the interest as income each year.  He sold the house in 2016 and both of us received the 1099-S form since we were both on the title.

[DianeW]

Your son is required to report the sale on his tax return since he was the owner of the house.  If the Form 1099S reported the entire sale proceeds on both of the forms you each received there should be a correction from the company that issued them.

If each of you show half the sale proceeds on each of your Forms 1099S, you can nominee your portion to him to eliminate IRS questions later.  There is nothing to report on your tax return.

Follow the instructions below to nominee your portion to your son.

Nominee returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area.

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:  Click here to order forms or publications from the IRS.

[vagabondslr42]

Thank you!  Can I do this on the Deluxe version of TurboTax or do I need to get a different version?  Thanks!

[DianeW]

@vagabondslr42 This can be done in Deluxe if it's the download version of TurboTax or Premier for the online version.

[vagabondslr42]

Thank you!

[bob130]

I have a follow-up question related to this.

My sister and I sold an inherited rental property but I received a 1099s for the entire amount. Would I issue a 1099s to her for 1/2 the amount? Also, on my turbotax form, I just declare my portion of sales proceeds rather than full amount?  Thank you.

[WendyN2]

If you inherited the property in 2020 and sold the property in 2020, give that it was inherited property, I am guessing that you will have no gain (or VERY little gain).  By selling it right away, you aren't leaving any room for the property to appreciate in value any further. So if you inherit your parents' home and it's worth $250,000, selling it right away could help you avoid capital gains tax if it's still only worth $250,000 at the time of the sale.

However, if you inherited it some years ago and have been keeping it as a rental property, then you would report the sale in the same fashion as you've been splitting the Schedule E Rental Income and related Expenses. You should enter the entire amount of the 1099s on your return since the IRS has the related 1096 for this 1099s and that is what they will be looking to match it up to. Issuing your sister a 1099 for the half of hers that you are reporting, including splitting any increase in taxable income to you due to the fact that you are taking the entire net gain, is the cleanest way to transact this.

[bob130]

We inherited the rental property 4 years ago and have been recognizing P&L over that time. There is a $60,000 total capital loss and my sister will want her share. If I enter the full amount of 1099-s on my tax forms then I will show a large capital gain based on my 50% cost basis

I seem to be a nominee recipient for my sister's half so can't I file a 1099-s and 1096 with IRS for her share?  Then just file my taxes based on my 50% share.

[Irene2805]

Yes - you are a nominee recipient for your sister's half of the proceeds and should issue a 1099-MISC to your sister.  The 1096 form is a cover sheet sent to the IRS along with the 1099.

Enter the full amounts listed on the 1099-S in your return.  You can enter the nominee adjustment in the Less Common Income section in TurboTax using these steps:

1. Click on Federal > Wages & Income   
2. In the Less Common Income section , click on the Start/Update box next to Miscellaneous Income, 1099-A, 1099-COn the Miscellaneous Income screen, click on the Start/Revisit box next to Other reportable income. 
3. On the Any Other Taxable Income? screen, click the Yes box.
4. Add your sister's amount as a negative number and put nominee adjustment as the description on the next screen, Other Taxable Income.
5. This amount will appear on line 8 of the 1040 (Other Income from Schedule 1).

Since you only have one form to prepare, you can download the forms and instructions from the IRS website:

• Form 1099-MISC, Miscellaneous Income
• Instructions for 1099-MISC
• Form 1096
• Instructions for Form 1096

[abg76]

Hello, 

I have a quick question. I hope the answer i've read so far applies to my scenario as well. 

I live in California, and I've sold my house of 5+ years. The property was under my name and my father's name and we got a 1099-S. Now, house was sold at the end of 2020, and we finally found a new home and purchased it officially in 01/2021. My parents had already filed their taxes, and I would like to just report all this on my return so they don't have to amend their return. Is this possible with the solution that was recommended, or will they have to amend their returns to report the sale (gains) of the old property. Now the new property is under my name is my mother, and the money for the new home did pass through her bank account. 

Any advice would be greatly appreciated. Thank you.

[AmyC]

@abg76 Put the whole thing on your return. Your parents can later amend their tax return and add Nominee with your social and their share of the money. Alternatively, they could do nothing and if the IRS asks, tell them it was reported in full on your return.

[bob130]

The only caveat is if you would need to pay taxes on the capital gains (i.e. exceed $250,000). Probably not, so you're good.

[Kimmiiwalks1]

I have a similar question. Bought a home with both parents on the title in 2012. It was my primary residence and my parents never lived there despite being owners. Now we are selling. The Sales price minus original sales price I paid is about $150k (doesn’t include improvements and I would guess the total gain is really about $128k. ). I was the primary owner, paid the mortgage, taxes, expenses everything. Am I ok to claim the full gain (and therefore get the home sale exclusion) on my 1099s form once it sells ? Or do my parents have to also complete this and adjust the proceeds to be divided into 3 (for each of us) and then possibly be subject to capital gains taxes since it wasn’t their primary residence? I want them to do the 1099 nominee form so I can get the home sale tax exclusion for the full amount and leave them out of it since it was my home. But it’s also complicated because I am currently looking at buying a new home with the full proceeds. I can’t qualify due to bad credit so I was planning to give my parents the proceeds as a down payment while they sign on for the loan. How can I make sure I am doing this all correctly?

[DMarkM1]

Assuming you are also an owner on the title, have the title agency show all the proceeds to you on the 1099-S.  As long as you are an owner you satisfy the ownership test for the exclusion.  

As for the new home I'm not sure you give your parent's a down payment.  They will co-sign on the loan and you give the down payment to the mortgage company and make the payments.  Your parents will not be on the deed; only on the loan. 

If you itemize deductions since you are making the payments and have your name on the deed, you can deduct the mortgage interest and property taxes.  

[mkenison]

I have a similar but slightly different situation.  I was on the title of a home with my mom who has lived there for 16 years.  The mortgage on this home was in my name.  This last year my mom inherited some money and paid off the mortgage, and met with an attorney and took my name off the property deed.  The attorney who did the transfer for us sent me a 1099-S for $95k.  We didn't actually sell the home, but my mom did pay off  the mortgage on it which was in my name.  Do I need to pay capital gains taxes on this $95k?