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shaverstang
New Member

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

 
9 Replies
Opus 17
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

Did your mother own the home up until she died and you inherited it, or was it gifted/deeded to you while she was alive?
How long after she died did you sell the home?
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
MichaelL1
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

The sale should be reported in the Investments section. Only your share is shown, so if the house sold for $150K then you show $75K (if you have half). 

The cost or basis in the house would be the Fair Market Value on the date of death.

The sales price should be reduced by selling expenses, such as closing costs, commissions, fixing up and cleaning costs. 

Due to inherited property, you get Long-term capital gain or loss treatment, which is more favorable. 

Due to the stepped up basis in the house, the gain or loss is generally small.  Sometimes due to selling costs, there is an actual loss on the sale. 

To enter your Inherited House sold

Click on Federal Taxes

Click on Wages and Income

Click on I'll choose what I work on

Scroll down to Investments

On Stocks, Bonds, Other, click the start or update button, put the house under Other. 

Opus 17
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

This is true if the taxpayer inherited the house, but is not true if the house was gifted to the taxpayer during the owner's lifetime.

Also, this is true only if the taxpayer sold the house after inheriting it and never rented it out or lived in it as a personal home.  If either of these things happened, the tax treatment will be different.

In most cases, if you sold the home pretty soon after the person's death and didn't live in it, the sale price equals the fair market value, you can deduct the real estate commission from the sales price, and therefore show a small investment loss which can be deducted against your other income.  But if the home was gifted or deeded when the owner was alive, or you lived there as a personal home (not counting a brief time you might have lived there to clean it up and get it ready for sale) then the rules are very different.
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
MichaelL1
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

Agree with you "Opus 17" on everything you said.  It appears from the question, it was an inheritance and not a gift (during mother's lifetime).  Thank you for the input.
shaverstang
New Member

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

OK, the home was gifted 1/2 to me and 1/2 to my brother-in-law.  I was told by my brother-in-law that his cpa said that turbo tax can't figure the deductions.  The deductions were the payoff of the reverse mortgage of $54K which my brother-in-law got my mom to take out end of life.  We had paid a total of $5600.00 pretaxes which was split between the 2 of us.  The title company deducted that and paid IRS, there were R.E. fees can't remember the exact amount off the top of my head; roof repairs $5400.00; other repair costs of approx $6400.00.  

I received from the title company a 1099 (or whatever the form number is for the IRS ??) total of $60K 1/2 of the sale of the house total of $120K.  We actually received a check after all of the bills and reverse mortgage pay off totaling $24K.

Where do I go in Turbo tax to fill in all of this?  Or is my brother-in-law right that I can't do it in Turbotax?
MichaelL1
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

Something still does not seem right.  How can it gifted to you, while your mother has a reverse mortgage on it.  The title would have to still be in her name.  Are you sure it was a gift while she was alive or an inheritance after her death?  I don't care which one, but as Opus 17 said above, it makes a big tax difference. The amount owed on the home is not used in computing the gain or loss on the sale of the home.
shaverstang
New Member

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

she passed away and we inherited 1/2 of the home
shaverstang
New Member

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

OK to answer what the CPA told my brother-in-law about Turbotax not being able to figure out all of the information/deductions correctly, is that correct?
Opus 17
Level 15

I inherited 1/2 of the money from my mom's sale of her house after she died. Where do I put this information?

Again, you say "gifted" above.  That has a specific meaning.  "Inherited" has a different meaning.

She could have placed you on the deed making you co-owners (1/3 share each) and you inherited her share only when she died.  Or she could have gifted you and your brother 1/2 each while she was alive, so you were the only owners (but this causes trouble with the reverse mortgage so it probably was not this.)  Or she could have gifted you the home with a life estate (which may or may not cause problems with the reverse mortgage.

You may need to check with the lawyer who handled the estate.

Assuming you mean the home was inherited, and you did not have any form of title until after she died, then the answer above applies.  Your "gain" or "loss" has nothing to do with the amount of the reverse mortgage, or who got paid what amounts when the home was sold, or how much cash you actually received.  Gain or loss only involves the selling price and the cost basis.

Your adjusted cost basis is the fair market value, plus any improvements you made after inheriting the house.  Repairs are not improvements.  Repairs restore a property to as-was condition while improvements add value or extend the useful life of the property.  A new tear-off roof is an improvement.  Patching leaks so you can sell is a repair.

For example, let's say you inherited the home on June 1, 2016 and sold it on September 30.  That's close enough that you can use the selling price as the fair market value on the date of her death.  The selling price was $120,000 and the real estate commission was $8,000.  Therefore the amount realized from the sale was $112,000.  You can't take any adjustment for repairs.  If the fair market value on the day she died was $120,000 and the amount realized is $112,000, then you have a $8,000 loss.  Each of you reports have the value, half the selling price, half the commission, and takes half the loss.  It doesn't matter how much was paid to the bank to pay off the mortgage or how much cash you actually received.

On the other hand, let's say the roof work qualifies as an improvement -- like a whole new roof that will last 20 years for the next owner.  Then, your cost basis is $120,000 fair market value plus $5400 roof = $125400.  Your selling price is $120,000, your commission is $8000, so you have a loss of $13,400. (divided in half for each of you).

In Turbotax, do not report this as "sale of a home".  Instead, report it as sale of an asset under "Stocks Bonds and other Assets" on the Income page.

If you paid "pre-taxes" that sounds like you are in a state where property taxes are paid in arrears.  Those are not adjustments to the selling price, those are property taxes, and they are deductible in the property tax section and are not an adjustment to the asset sale.

Turbotax can handle the sale of an asset just fine, but you have to know the rules about fair market value, the difference between adjusted cost basis, what expenses are adjustments to basis and what closing costs are tax deductions and what closing costs are not deductible at all.  Turbotax does not hold your hand though every little detail, you have to have some knowledge.  So in the sense that a CPA is better, what do you expect him to say?  You can pay him $300 to hold your hand and explain everything, or you can use turbotax for $80 and then you have to know more of the tax details on your own.  

From your explanation above, either your CPA doesn't know what he is doing, or you are confused (or lacking knowledge) and he is withholding facts to convince you to pay him.  (The mortgage payoff has nothing to do with gain or loss and you can't take a tax deduction for the mortgage payoff.  The property taxes are deducted differently and other closing costs may or may not be adjustments to the purchase price for the gain or loss calculation.)
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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