How do we report a sold life estate deeded property on our taxes?

[Jensenl103]

My dad passed in March 2018. He had a life estate deed drawn up 9 years ago. My 2 brothers and I are the remaindermen. The FMV when he died was $150,000. We sold the house a few months later for $150,000. We didn’t receive a 1099-s. Each of our net proceeds from the sale was about $47,000 after expenses. Please be as detailed and specific as possible. Thank you. 

[Hal_Al · Accepted solution]

Your cost basis is the $150,000 FMV  (or $75K each) on the date of death. So, you have no capital gain. In fact, you may have a capital loss, after the expenses of sale. This assumes the property was not used for personal use after your father died.

Since no 1099-S went to the IRS, you can just not report it at all.

If you want to cover yourself and report it, type> 1099-S, sale of property other than main home <in the find box, then follow the interview. If you decide to claim the capital loss, you may add carrying costs (insurance, utilities, maintenance, taxes, mortgage interest), for the few months you owned it, to you cost basis.

If you want to claim the loss, do not call it a 2nd home. Choose everything else. You will not be asked for expenses of sale/carrying costs; so add them to the FMV

[ScruffyCurmudgeon]

To retierate @Hal_Al 's point, the house cannot have been used as the personal residence of any of the remaindermen if you desire to use the fact that in that case the house, after your father's death, was characterized as "investment property" on which you would claim a loss [or a gain].  As to gain, for any casual reader, it is important to recognize that the remaindermen cannot claim the $250,000/$500,000 exclusion of gain.