How do I do a capital gains tax for a life estate sold after my mother passed away and the proceeds were split evenly between my brother and I?

[PaulaM · Accepted solution]

Your cost basis for the inherited home is the fair market value (FMV) at the date of her passing. This gives you a stepped up basis in the property. The two of you will each enter your proportionate share of the sales proceeds and FMV on your return.

Enter in the Investment section and choose 'Everything else' for type of investment sold.

Then enter 1/2 of the net proceeds from the sale. Continue on to enter that the property was inherited and the date of your mother's passing, and 1/2 of FMV at the date of her passing . Continue to the gain/loss computation (if any). The sale is reported on schedule D even if the gain is 0.

Note: If you received a 1099-S for the sale be certain that it is for your share only. If not, contact the issuer for a corrected copy.