Married couple owns a house as their primary residence.
They purchase a small home for daughter to live in while attending college.
All three of their names are placed on the title and the mortgage loan.
Because the daughter is the only resident of the home, it qualifies as her primary residence, and they're able to get a "primary" home loan instead of an "investment" loan.
The couple pays the mortgage while daughter is a student.
After college, daughter continues to live in the home and takes over all the payments: mortgage, bills, etc.
When the small home is sold, parents agree to split the profits equally with the daughter.
Let's use these numbers:
Purchase price: $80,000
Selling price: $150,000
Parents receive 1099-S showing Gross Proceeds (aka Selling Price) of $100,000
Daughter receives 1099-S showing Gross Proceeds (aka Selling Price) of $50,000
Capital gains rules say daughter doesn't have to even report the sale, since she's well under the $250k limit. However, she DID receive a 1099-S, so she must document it. But even though it's a net $0 against her taxes, that documentation appears on Schedule D, which is not included in the free online TurboTax.
Question 1: Will she have to pay the $60 to "upgrade" from free to TurboTax Deluxe in order to include a Schedule D? (TurboTax free online is currently blocking her from proceeding until she "upgrades")
Question 2: Should the amounts be entered as below on each of their TurboTax instances?
Daughter:
- Sale Proceeds: $50,000
- Cost Basis: $0
Parents:
- Sale Proceeds: $100,000
- Cost Basis: $80,000
I think this distribution makes the most sense since the daughter didn't put out any money for the home purchase, but she did get an equal share of the sale proceeds.
