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mortgage balance on inherited house

I sold my inherited house last year for 183000.00 the proceeds are split two ways between me and my sister and my 1099-s says my gross proceeds are $91,500.00,   but on my closing statement after we pay the mortgage balance and closing cost our proceeds are only  $28,500.00 each.  I can find where to claim the closing cost on selling expense but I can't find where to claim the mortgage balance of  $111,000.00.

 

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6 Replies

mortgage balance on inherited house

The mortgage balance is not a deduction; you do not deduct the balance from your proceeds.

 

You deduct your adjusted basis from the sales proceeds (less selling expenses).

mortgage balance on inherited house

does that mean I put $28,500.00 as gross proceeds on schedule D instead of the $91,500.00 listed as gross proceeds on my 1099-S

mortgage balance on inherited house

No, you enter your share of the proceeds (which appears to be $91,500) and then enter your share of the adjusted basis.

 

The mortgage balance (that was presumably paid off at closing) does not enter into the equation.

mortgage balance on inherited house


@nan306 wrote:

does that mean I put $28,500.00 as gross proceeds on schedule D instead of the $91,500.00 listed as gross proceeds on my 1099-S


No, you must list the gross proceeds exactly as on the 1099-S or the IRS will send a nasty letter.  The fact is, the proceeds from your sale really are $183,000, or $91,500 each.  It just so happens that in your case, part of the proceeds were paid in advance to the person who took out the mortgage.

 

This should not cause a problem with inherited property, because you received a stepped-up basis based on the fair market value when the person died.  Your capital gains are the difference between your basis and the sales proceeds. For example, if you inherited the home in the same year and the fair market value at the time was also $183,000, then you have no taxable gain.  Suppose you inherited the property a year ago and it's fair market value was $175,000.  Then your gain is only $8,000 (split two ways) so only that part of the gain is taxable.

 

You can further reduce your capital gains by including in your basis, certain closing costs as listed in publication 523, as well as the sales commission.  (Add them to the basis instead of deducting them from the sales price.  What you enter as the sales price must match the 1099.)

 

So suppose you inherited the home last year and spent a few months cleaning it up and selling it.  Your inherited basis is $175,000, you sold for $183,000, you paid 6% commission ($11,000), and you had $1000 of other includable closing costs.  You would list the basis as $187,000, your sales price as $183,000, and you end up with a $4000 loss that you can deduct (split 2 ways), instead of a taxable gain. 

mortgage balance on inherited house

when I list the sale price as $183,000.00 and deduct 13,000.00 in  selling expense it shows that I have a loss of $76,857.00, I don't think that's right.

Since the gross proceeds were divided in half on my 1099S,  half for me and half for my sister, should I be dividing the sale price by half also? 

mortgage balance on inherited house

If the 1099-S was divided in half, divide everything else in half (selling expenses, cost basis). 

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