1099-S from sale of property while in Estate

[tonyiiiafl]

My wife's father (who was a resident of NJ) passed on July 2018. An estate was filed, and the house was sold and transferred to the new owner on January 2019. The property was sold $150,000.00 under assessed value of $269,000.00 for a total proceed of $119,000.00. The estate was granted an exception for taxes by New Jersey because the estate value was under the threshold of taxable value. This was the only asset left in the estate. Life insurance policies were paid taxes on by the recipients in 2018. There were 5 children who each received a share of the sale, and my wife received a 1099-S for the total amount. How do we handle this 1099-S? Is it taxable income? Do we split the amount between the 5 recipients? 

Sincerest Thanks!

Tony

[Anonymous_ · Accepted solution]

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@tonyiiiafl wrote:

There were 5 children who each received a share of the sale, and my wife received a 1099-S for the total amount. How do we handle this 1099-S? Is it taxable income? Do we split the amount between the 5 recipients?

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Did the 1099-S your wife received have the EIN of the estate or your wife's SSN? 

If the 1099-S had the EIN of the estate, a Form 1041 will have to be filed to report the gross proceeds of the sale the estate received to the IRS. If there was a loss on the sale, and the property was not being held for personal use, the beneficiaries may be able to deduct that loss (pro rata).

If the 1099-S had your wife's social security number on it, then she will have to report the transaction on her personal income tax return and then indicate that she received a portion of the proceeds as a nominee. TurboTax does not support reporting a transaction for which a 1099-S is received as a nominee.