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Transfer on Death Deed Tax Implications

dsframe1953 — Wed, 10 Mar 2021 14:42:28 GMT

My Mother passed away in May of 2020 and I acquired her (mortage free) home by a transfer on death deed. I sold the home in September of 2020 for $172,000.00 and divided the proceeds between my 3 siblings and myself. The title company gave me a Proceeds from Real Estate Transaction sheet and an IRS Form 1099-S. Do I need to report the exchange and sale to the IRS?

I answered the T-F questions, but question 1 in Part II as follows is false for me:

I owned and used the residence as my principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange of the residence.

I acquired the house 5/2020 and sold it 9/2020.

Re: Transfer on Death Deed Tax Implications

Anonymous_ — Wed, 10 Mar 2021 15:00:03 GMT

@dsframe1953 wrote:

Do I need to report the exchange and sale to the IRS?

I am sorry for your loss. Yes, you need to report the sale to the IRS.

The basis of the home would be the fair market value on the date of death of your mother. The sales price would be the $172,000 less selling expenses. Odds are there is no gain since the sale and the date of death are separated by only a few months.

You can report the sale in the Investment Income section the same as if you sold a stock, mutual fund, or bond.

Re: Transfer on Death Deed Tax Implications

dsframe1953 — Fri, 16 Apr 2021 15:55:31 GMT

Can I somehow deduct the amounts I had to pay my 3 siblings when I divided the proceeds? I was the Executor, but my Mother's will said I must divide everything equally.

Re: Transfer on Death Deed Tax Implications

Anonymous_ — Fri, 16 Apr 2021 16:10:51 GMT

@dsframe1953 wrote:

Can I somehow deduct the amounts I had to pay my 3 siblings when I divided the proceeds?

Yes. You would report the entire amount of the proceeds on your return and then indicate that you received your three siblings share as a nominee.

See https://www.irs.gov/instructions/i8949#idm140393400302768

TurboTax can now handle this scenario.

Re: Transfer on Death Deed Tax Implications

dsframe1953 — Fri, 16 Apr 2021 20:25:15 GMT

How do I determine what the fair market value of the house was at the time of my Mother's death? I made approximately $15,000.00 in repairs and sold it for $172,500.00. I also paid fees at closing of $14,404.23. After all was said and done, I divided the proceeds 4 ways and paid myself and my 3 siblings.

Re: Transfer on Death Deed Tax Implications

Anonymous_ — Fri, 16 Apr 2021 22:13:56 GMT

If she passed in May and you sold in September, then the fair market value is most likely exactly (or very close to) the selling price, assuming the sale was an arm's-length transaction.

You can add improvements you made to the basis and subtract selling expenses from the sales price.

Re: Transfer on Death Deed Tax Implications

fanfare — Fri, 16 Apr 2021 23:15:03 GMT

It is easier to report your sale as "25% interest in inherited home"

and divide everything by four.

Your siblings would do the same there is no need for nominee reporting.