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New Member

Life Estate - 1099S - Proper way to record

Hi,

My mother had her home in a Life Estate, with me and my 2 other siblings as Joint Tenants with Rights of Survivorship. My questions is how do I properly record this in TurboTax?  Some points of note:

On the date of inheritance, the fair market value was $385k.  We sold the property not too long afterwards for the same amount, 385k.  The proceeds from the sale were 128k after paying closing costs, reverse mortgage company, etc.  We each received a 1099-S form listing the total gross proceeds of 128k.  I would have expected that form to just show my 1/3 which would have been about 42k, but that's not what I'm seeing.  So in TurboTax, do I just list the investment type as "other", and select "inheritance" with the fair market value of 385k and the net profit of 42k (my 1/3 payment)?  Also, would I categorize it as a non-investment property for personal use, which would record the sale as a $0 loss?

  

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New Member

Life Estate - 1099S - Proper way to record

Thanks so much for the condolences and the detailed response.  Your assumption was correct, we were joint tenants with my mother retaining the life estate.  I understand your explanation of the adjusted basis and how to come up with the Gain (Net Sale – Adjusted Basis = Gain).  I just want to clarify where that figure goes.  Is it in the field “Net Proceeds” in screenshot 4? Also, for the “Fair market value of the property on date deceased passed away.” Right now I have the 385k number in that field which is what the appraised value of the property (and sale price) was when she passed.  Is that correct? I just wanted to make sure I didn’t need to manipulate that number to account for the 1/3 portion I am concerned with.
Thanks!
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Level 14

Life Estate - 1099S - Proper way to record

Keep in mind that your tax return should reflect only YOUR figures (1/3 of the total).  
--So, yes, 1/3 of the gain figure goes in the net proceeds box.  
--Is $385k the total price?  If so, just enter 1/3 of that for your share ($128,333) for the fair market value of the property when your mother passed away.
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New Member

Life Estate - 1099S - Proper way to record

Ok, thanks.  The total sale price was 385k.  After all loans were paid off and closing costs, etc. we received a total of 128k in proceeds. That amount was divided between the 3 of us.   So about 42k each.  My 1099s for some reason showed the full 128k amount instead of just 42k.
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Level 14

Life Estate - 1099S - Proper way to record

That's OK -- the 1099S just reports the entire transaction, regardless of the number of owners.  Just enter the 42k as your portion of the sale.  Presumably your sibs will do the same.
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New Member

Life Estate - 1099S - Proper way to record

If your mother has passed away you get a full step up in basis to the fair Market Value of the property on the date of your mothers passing. So your basis & sale price are both  $385,000 and you do not have long term capital gains. So no taxes due.

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Returning Member

Life Estate - 1099S - Proper way to record

 

My situation is very similar to the one I am commenting on.

If you have a stepped up basis and sell very soon after death, I think you could actually have a loss which you could report up to $3000 in the year sold.  

Stepped up basis $385K

Sold for $385K less some fees (ie $365,000)

So how again is this reported to the IRS using Turbo Tax?

 

 

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Expert Alumni

Life Estate - 1099S - Proper way to record

@juva:  Here are the steps to report in TurboTax, as outlined by Irene S in an earlier post:

 

  1. Click on Federal Taxes > Wages & Income [In TT Self-Employed:  Personal > Personal Income > I'll choose what I work on].
  2. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.  [See Screenshot #1, below.]
  3. If you have already entered some investment sales, you will see a screen Here's the investment sales info we have so far.  Click on the Add More Sales link.  [Screenshot #2]
  4. If you haven't already entered some investment sales, you will see a screen Did you sell any investments in 2016?  Click the Yes box.
  5. On the screen, Choose the type of investment you sold, mark the button for Everything Else and click Continue.  [Screenshot #3]
  6. On the next screen, enter the sale information.  Be sure to enter the net proceeds and mark whether income taxes were withheld or not.  [Screenshot #4]
  7. Continue through the screens, entering the requested information.

If this information does not address all your questions, please respond to this answer string with additional information.

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