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paully1-
New Member

Mother and three children bought her home together and all four were on the deed when she died. Three children sold home so how do we calculate cost basis and gains?

What cost basis do we use and how many ways do we divide the cost basis and sale proceeds? 

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Accepted Solutions
PaulaM
Expert Alumni

Mother and three children bought her home together and all four were on the deed when she died. Three children sold home so how do we calculate cost basis and gains?

Each person initially has a 1/4 share of the original cost. After the mother's passing, then the remain 3 children each have a 1/3 share in the mother's portion.

Each of the 3 remaining add to the cost basis of their on share, the 'stepped-up' basis of the inherited portion. 

Ex: Home Cost originally = $200,000  Each has a cost basis of $50,000. Mom then passes. The fair market value of her share is now $60,000 (stepped-up value). Now the remaining owner's add 1/3 or $20,000 to their original basis of $50,000 for a total basis each of $70,000.

Each report their new basis and proportionate (1/3) share of the sale proceeds on their tax return to compute gain. Enter under the investment section. To navigate to the section:

  • In your open return, select Tax Tools
  • Tools
  • Topic Search
  • Type 'investment sales' in the box, then select GO

On the page, Choose the type of investment you sold, select the radio button for 'second home' and continue to enter the property information and your proportionate share of the sale proceeds. 

On the page, Tell Us How You Acquired This Home, enter how you acquired the home and continue with the interview. Gain/loss is computed and moved to appropriate form for your proportionate share. 

Note: If you received a 1099-S for the sale of the home, make certain the proceeds are recorded for your share only. If not, contact the payer for a corrected form.

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1 Reply
PaulaM
Expert Alumni

Mother and three children bought her home together and all four were on the deed when she died. Three children sold home so how do we calculate cost basis and gains?

Each person initially has a 1/4 share of the original cost. After the mother's passing, then the remain 3 children each have a 1/3 share in the mother's portion.

Each of the 3 remaining add to the cost basis of their on share, the 'stepped-up' basis of the inherited portion. 

Ex: Home Cost originally = $200,000  Each has a cost basis of $50,000. Mom then passes. The fair market value of her share is now $60,000 (stepped-up value). Now the remaining owner's add 1/3 or $20,000 to their original basis of $50,000 for a total basis each of $70,000.

Each report their new basis and proportionate (1/3) share of the sale proceeds on their tax return to compute gain. Enter under the investment section. To navigate to the section:

  • In your open return, select Tax Tools
  • Tools
  • Topic Search
  • Type 'investment sales' in the box, then select GO

On the page, Choose the type of investment you sold, select the radio button for 'second home' and continue to enter the property information and your proportionate share of the sale proceeds. 

On the page, Tell Us How You Acquired This Home, enter how you acquired the home and continue with the interview. Gain/loss is computed and moved to appropriate form for your proportionate share. 

Note: If you received a 1099-S for the sale of the home, make certain the proceeds are recorded for your share only. If not, contact the payer for a corrected form.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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