I inherited our parents home along with 3 sisters. We sold the home and split the proceeds. Do I enter the contract price when form is asking for Fair Market Value?

[tiamadi64]

on 1099S. asking for Fair Market Value when previous owner passed away. Home was never in our names.

[MindyB]

It depends, the fair market value on the date of death is not necessarily the same as the contract price.  This amount is very important, because you will receive a step-up in basis.  Meaning, the "cost" changes from your parent's cost to the fair market value on the date of death.

If you had a professional appraisal performed shortly after the owner's passing, that is the value that you should enter.  

If you sold the home shortly after the owner passed away, it is reasonable to use the contract price.  

If the above scenarios are not applicable, I suggest asking your realtor to help you obtain this value.

[tiamadi64]

thanks, we did not have an appraisal done, we sold it for what our realtor said we should sell it for. and we sold it several months after my dad's passing. We each (4 sisters) split the proceeds and we each got a 1099-s to use for our own taxes. So I enter my payout of $100,000 and then turbo tax asks for Fair Market Value so do I enter the sale price of $400,000 or do I split the fair market value by 4 and enter $100,000?

Thanks

[AnnetteB6]

You should report only your share of the proceeds and fair market value (or basis) on your return.  

If the Form 1099-S is reporting only your share of the proceeds (one quarter of the total), then the fair market value you should enter would be divided by 4.  

@tiamadi64 

[tiamadi64]

Thank you so much

[dalee731]

I understand to report only one quarter of the total of proceeds and the fair market value would be divided by 4.  My question is, we sold it to him for $260,000 and gifted him $65,000.  So would the fair market value be $325,000?

Thank you.

[KrisD15]

The Fair Market Value would be the amount the house is expected to sell for on that date.

If you decided that 260,000 plus 65,000 was the value, then I assume you decided that 325,000 was the Fair Market Value. I don't know how you came up with those numbers, but I assume you got a market analysis or appraisal done.

[dalee731]

Yes, we had an appraisal done. So the fair market value would be $325,000 and I would divide that by 4 and enter that number?

Thank you.

[KrisD15]

Yes,

Thank you for using TurboTax. 

[dalee731]

I'm not sure if this matters, but the home was in all four of our names.

Thank you.

[Opus 17]

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@dalee731 wrote:

I understand to report only one quarter of the total of proceeds and the fair market value would be divided by 4.  My question is, we sold it to him for $260,000 and gifted him $65,000.  So would the fair market value be $325,000?

Thank you.

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You are not the original person who posted the question, you seem to be a new person and may have different facts.  

What is this "gift" you are talking about?  Who owned the home, and who was the recipient of the gift?  That may change things, and may need to be reported separately.  Gifts are not tax deductible and don't adjust your cost basis.  

[KrisD15]

Yes, it could matter. 

Real estate law is govern by the states, so you might want to speak with a local real estate attorney. 

What do you mean by "the home was in all four of our names"?

If you INHERITED the house, your basis (the value) is the Fair Market Value on the date of passing.

If you OWNED the house, your basis (the value) is what you paid or the Fair Market Value when you were added to the deed. 

If you were on a "Life Estate Deed" your basis (the value) is the Fair Market Value on the date of passing. 

If you are unsure, obtain legal advice first. 

[dalee731]

I apologize.  I thought I started a new post.  The home was a life estate deed.

[M-MTax]

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@dalee731 wrote:

The home was a life estate deed.

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With a life estate, those previously owning the remainder interest take the entirety of the property at its FMV on the date of death.

[Opus 17]

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@dalee731 wrote:

I apologize.  I thought I started a new post.  The home was a life estate deed.

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With a life estate, the heirs' basis when selling is the fair market value on the date the previous owner passed.  This could be equal to the selling price, as long as the sale was reasonably close in time to the death and there weren't any major changes in the real estate market (an open sale is the best way to determine FMV).  If there are 3 heirs, each heir would report 1/3 the FMV as their basis and 1/3 the selling price as the selling price to calculate any gain.

However, you still haven't explained the "gift" situation.