Reporting home sale joint tenants

[tna035]

Hi - I own property with a friend, both of us are on the deed but only I’m on the mortgage. It’s a joint tenants with rights of survivorship. We sold the house. She can use capital gains exclusion because she has lived in the house since it was purchased. I have not. She is taking the entire profit per a notarized agreement we made (unmarried ex relationship situation). Do I still have to report my “share” and incur the capital gains tax even though I’m not actually taking any of the profit? If so, do I only report 50% of the profit? If she’s not filing on her taxes because she qualifies for the exclusion, will the IRS be confused by that? Thanks!

[ThomasM125]

The issue is did you receive the sale proceeds and then give them to her, or did you give her your share of the house and then she sold it for a gain.

In the first scenario, you would have to report the gain and pay tax as is necessary. Under the second scenario, you would not, because she would pick up your basis when you gifted the house to her and she would presumably be exempt from tax because of the allowed exclusion.

So, it comes down to your intentions as much as anything. It would have been better if you had transferred the house to her legally before you sold it though.

[tna035]

Thanks! Under the first scenario, do I still only need to report my 50% since we are joint tenants? It has nothing to do with who’s name the mortgage is in, correct? Still only 50% because of our joint tenancy? Will this be confusing to the IRS since she doesn’t have to report her 50%?

thanks for your input!

[DianeC958]

Yes if you received 50% of the profit from the sale of the property.

Correct it has nothing to do with who's name is on the mortgage.

If she receives a 1099-S for the sale of the property it does need to be reported on her return and then she can exclude the gain on the sale due to her living there.

@tna035

[tna035]

@DianeC958 I didn’t receive 50% of the profit per a notarized agreement we had, but we were both on the deed at time of sale (I didn’t gift to her) so it sounds like even though I received nothing in the sale I’m still required to report a 50% gain since we are joint tenants on the deed. 

[HelenC12]

Who is on the deed does not matter for tax purposes. What matters is the tax form being sent to the IRS.

No, you don't have to report it on your income tax return if the 1099-S form was issued to the other person with their Social Security Number and it was for 100% of the proceeds.

If you receive a Form 1099-S for amounts that actually belong to another person or entity, you are considered a nominee recipient.

You should file a Form 1099-S with the IRS (the same type of Form 1099 you received).  File the new Form 1099-S with Form 1096 (this is a transmittal for the 1099-S) by mailing to the Internal Revenue Service Center for your area.

1. On the new Form 1099-S, list yourself as the payer and the other owners, as the recipients.
2. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099-S to show the amount for each owner.
3. The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:  Click here to order forms or publications from the IRS.
4. In TurboTax, enter the proceeds and cost basis as the same amount which will result in zero capital gains. See Where do I enter Form 1099-S?
5. For additional information see TurboTaxDianeW's answer here.