I just recently received money from the house that was sold after my mother in law passed away and i got half of the proceeds. how do i file this with turbo tax

[shirleyo57]

Will do thanks

[ScruffyCurmudgeon]

So, just to be clear, you, your husband, and his siblings took possession of the house prior to the death of his mother.

May I assume that none of you then used the house as your own residence?
- Added comment:   It has been suggested to ask:  Did your in-laws transfer the deed at an earlier date into a Life Estate? 

Given that, you should understand the following:

• Had the house still been in the name of your mother-in-law at the time of her death, the "Cost Basis" of the house would have been the Fair Market Value on that date.  For example, the average house in 2016 was about $221,000.  Therefore, when the house would have been sold under that scenario, your husband and siblings would have only had to report capital gain on the increase from that value [or report capital loss on a lower selling price].
• Instead, having taken ownership prior to her death, your husband and siblings must use your mother-in-law's original cost basis, which a) may be hard to determine and b) is likely to be very much lower.  As an example, if your in-laws purchased the house 30 years ago, they might well have paid only $50,000.  So now the reported capital gain will have increased by about $171,000.

All of this is to say that those who took possession prior to death DID NOT INHERIT (legally) but instead were the recipients of a GIFT.

Upon sale your husband and siblings have a capital gain or loss based on the net sale price and less the original cost basis of their mother.  This would be adjusted:  Adjusted basis being, in this case, the value of the house at date of death + repairs and improvements you made to the house in preparation for the sale.  

By the way, I assume a Form 1099-S was issued - but to whom?  

Your husband's net share of the capital gain or loss would be reported on your joint Schedule D.  The house would be considered an investment and not a primary residence so a loss is eligible for reporting.

Make sure you are in the 'Stocks, Mutual Funds, Bonds, Other', section of the program, which is  in the Investment Income section; not the Home Sale section, which is in the Other Common Income section, since this isn't your personal residence.

NOTE! Be careful that you pick in the pull-down list that this is not t a  "Not a sale reported by an investment institution"  instead use "Everything Else"

You will get the screen that says "Enter Your Investment Sale Information". Here you enter description (i.e., gifted house; sale of property, etc) proceeds, date of sale, cost basis (fair market value on date  of death of the decedent). For the pull-down entry of "How Acquired" make sure to select "GIFT"

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