Why are my 1099S proceeds the full amount, when we paid half to the mortgage company

[theironrose]

Sold an inherited property. My 1098 shows the outstanding mortgage principal, the amount we still owe to the mortgage company. BUT our 1099-S shows our Gross proceeds as the entire cost of the sale. We did not receive that entire amount. The Mortgage Company received their share. ??? Why do my gross proceeds say that we received the entire amount?

[Fern · Accepted solution]

The 1099 S is showing the sales price for the property. Any gain or loss is calculated on the sales price minus your basis in the property. Your basis in the property is not net of any outstanding mortgage. The amount of the mortgage is taken out of both sides of the equation. The proceeds are more than the cash you received, however your basis is more than the cash that was put down on the property.

In Turbo Tax, the sale will be entered in the Investment section (unless you are a real estate professional, then it would be entered on Schedule C).
• Select Federal Taxes
• Select Wages and Income
• Select Show More at Investment Income
• Select Start at Stocks, Mutual Funds, Bonds, Other
• Respond Yes – you sold something
• Respond No – you did not receive a 1099B
• Choose Everything Else as the asset sold
Enter the information about the sale of the house you inherited. For the Tell Us How You Acquired This Property, indicate that you inherited it

Because the property is inherited, your basis will be the fair market value at the date you inherited the house.