Question about Substitute 1099-S on inherited property

[Blueeyez58]

My cousin and I inherited my uncle’s house when he passed in 2025. It sold for $70K in 2025, was worth $55K, at the time of the sale, and the only improvement we made was a wheelchair ramp for about $150. Total costs to sell the property (based on the title company’s info) was $4888.87. Line 2 on the 1099-S is showing gross proceeds of 35K for each of us. My question is: when it comes to “Other increases to home adjusted cost basis,”  on the TurboTax form, what do I put in that line?  My uncle purchased the home in 2012 for $37,795 and the payoff on the house was $26,966.88 when he passed. So each of us ended up with a check for $19,072.12. It’s splitting all of this in half that’s really throwing me, plus the “other increases to base amount.” Thank you so much!

[Blueeyez58]

I didn’t see a method to edit my post, but the questions I have are basically how to split all this up. Do we split up the closing costs of 4887 between us? To figure fair market value, which I think would be $15K (based on value of home at sale of $55K and sales price of $70K), do we split that down the middle too and report it that way? It’s confusing when you’re dealing with more than one person on this. Thanks again.

[MaryK4]

Can you clarify what you mean by was "worth" ($55K)?  Your basis is the fair market value on the date of his death, which is usually pretty close to the amount you sell the property for (The IRS defines fair market value as what a willing buyer would pay).  This allows the inheritance to essentially be tax-free.  (There is a time value so if there was more time between the death and sale the market could change.)  

For  “Other increases to home adjusted cost basis,” you would put your half of the cost of the ramp, so $150.  

Yes, you would want to divide the selling costs in half as well.  

If the fair market value at time of death was $55,000 you would each use $27,500 as the basis- this would leave you with a taxable income of approximately $4,981, but once again please check the fair market value.  

@Blueeyez58

[Blueeyez58]

I meant the real estate agent said it has was worth $55 that at the time of his death (What he anticipated it could sell for). Thank you!

[KrisD15]

Thank you for clarifying that, but as MaryK4 pointed out, the Fair Market Value is what a Buyer is willing to pay and if something is sold soon after it is inherited, there is usually no gain, no profit. 

If someone inherits a house that is worth 55,000 on the date of passing and then they hold on to it as the market gets stronger and end up selling it 5 years later for 70,000, they would need to claim 25,000 as a capital gain (profit). 

But since you inherited the house and sold it the same year for 70,000, I would venture to assume the Fair Market Value was indeed 70,000, not 55,000.

A Real Estate Agent can make a Comparative Market Analysis (CMA) which is NOT an appraisal, since they are not Appraisers, but the CMA can be close. In your case, I think the Real Estate Agent was off and the Fair Market Value on the date of passing was 70,000 if the Buyer was a "normal" buyer, meaning this buyer had no reason to pay more than what the property was worth.

I also assume the ramp was installed BEFORE your Uncle passed, so that cost would not be added to the Fair Market Value. If installed after, it could add value, but then again it might not have.

I suggest you speak with the Real Estate Agent again and ask if the 70,000 it sold for was actually the Fair Market Value, and if yes, use that amount, split this between the Heirs and split the selling costs (such as the agent's commission).

You should each show no gain and perhaps even a slight loss.