Solved: I received a cash inheritance from the sale of my father-in-laws house. I received a 1099S from the lawyers. Do I claim it on my taxes?
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I received a cash inheritance from the sale of my father-in-laws house. I received a 1099S from the lawyers. Do I claim it on my taxes?

 
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Level 15

I received a cash inheritance from the sale of my father-in-laws house. I received a 1099S from the lawyers. Do I claim it on my taxes?

You should only get a 1099-S in your name if the house was transferred to your name and then "you" sold it. (Even if the lawyers handled the details.)  This is usually smarter because it avoids some of the taxes that the estate would likely have to pay if the estate sold the house.

You owe capital gains tax on any gain from the sale.  Your gain is the difference between the sales proceeds and your cost basis.  You inherited a stepped up cost basis when you inherited the house--your cost basis is the fair market value on the date your relative died.  Assuming you sold the property in a reasonably close time to his death, then the sales price and the cost basis are the same and you don't actually have a gain to be taxed.  But since you received a 1099-S form you will need to report the sale.

In Turbotax, go to "Sales of stocks, bonds and other assets."  Don't use "your house" because you didn't live there, use "other property."  The cost basis is the value on the date he died, the date acquired is the date of death, and the method of acquisition is inherited.  The rest should be simple.

*Answers are correct to the best of my ability but do not constitute legal or tax advice.*
**If a post answers your question, choose it by clicking on "Mark as Best Answer".**

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Level 12

I received a cash inheritance from the sale of my father-in-laws house. I received a 1099S from the lawyers. Do I claim it on my taxes?

You probably should pick up the phone and talk to the lawyers about this so that you understand exactly what your responsibilities are.  Is your name and Social Security number on the 1099-S as the seller?

If your father's estate or trust sold this house, i.e., the title of the house was not transferred to you before the sale, then the estate or trust should report the sale and pass through to you any information you need for your income tax return on Schedule K-1 - "Beneficiary’s Share of Income, Deductions,  Credits, etc."  However if the house was retitled in your name and you sold the house - handled by "the lawyers" presumably - then you'd need to report the sale on your income tax return along with any associated gain or loss.

Typically the basis for inherited property is "stepped up" to the property's "fair market value" at the date of death so a sale of that property shortly after the act of inheriting wouldn't be expected to report much of a gain, most likely a possible loss because of selling expenses.
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Level 15

I received a cash inheritance from the sale of my father-in-laws house. I received a 1099S from the lawyers. Do I claim it on my taxes?

You should only get a 1099-S in your name if the house was transferred to your name and then "you" sold it. (Even if the lawyers handled the details.)  This is usually smarter because it avoids some of the taxes that the estate would likely have to pay if the estate sold the house.

You owe capital gains tax on any gain from the sale.  Your gain is the difference between the sales proceeds and your cost basis.  You inherited a stepped up cost basis when you inherited the house--your cost basis is the fair market value on the date your relative died.  Assuming you sold the property in a reasonably close time to his death, then the sales price and the cost basis are the same and you don't actually have a gain to be taxed.  But since you received a 1099-S form you will need to report the sale.

In Turbotax, go to "Sales of stocks, bonds and other assets."  Don't use "your house" because you didn't live there, use "other property."  The cost basis is the value on the date he died, the date acquired is the date of death, and the method of acquisition is inherited.  The rest should be simple.

*Answers are correct to the best of my ability but do not constitute legal or tax advice.*
**If a post answers your question, choose it by clicking on "Mark as Best Answer".**

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