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My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.

 
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Level 15
Level 15
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My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.


@testbutton66a wrote:

How do I put this on my taxes? Lawyer sent me a 1099-s.  Is my share of the condo fully taxable. Do I only pay taxes on the capitals gains on the condo? Parents purchased for 125k, 20k improvement and we sold it for 165k.

165k was the fair market value. Do I claim 10k as capital gains and my brother claims 10k? 


@testbutton66a 

Because your parents had a life estate, the condo is treated as if you inherited it when your mother died, not as a gift, even though your parents transferred the title to you while they were still alive. The basis of inherited property is the fair market value on the date of the decedent's death. What your parents paid for it doesn't matter. If you sold it for the fair market value, you have no gain. (This is common when an inherited property is sold soon after the death.) You might even have a small loss if you paid a broker's fee or other selling expenses.


You only pay tax on the gain, not the entire proceeds of the sale. Since you have no gain, you will not have to pay any tax on the sale. Assuming you never rented out the condo, it is considered personal use, so you cannot claim a loss on it. But even though you will not have to pay any tax, you and your brother must each report it on your tax returns. The lawyer should have sent each of you a 1099-S for half the proceeds.


You enter it in TurboTax as the sale of a second home. See the following FAQ for instructions. You cannot report the sale of a second home in TurboTax Deluxe Online. You will have to either upgrade to Premier or higher, or use any edition of the CD/Download TurboTax software.


Where do I enter the sale of a second home, an inherited home, or land on my 2019 taxes?

 

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Level 15
Level 15

My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.

What is your tax question?

 

Your basis in the condo is the fair market value on the date of your mother's death.

 

New Member

My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.

How do I put this on my taxes? Lawyer sent me a 1099-s.  Is my share of the condo fully taxable. Do I only pay taxes on the capitals gains on the condo? Parents purchased for 125k, 20k improvement and we sold it for 165k.

165k was the fair market value. Do I claim 10k as capital gains and my brother claims 10k? 

Employee Tax Expert

My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.

Yes, you each incurred $10,000 in capital gains, at first look.

 

Your parents had a life lease which means you inherited the condo at the date of death.  In addition, you may have had expenses of selling that can be added to the basis. 

 

As for reporting it, the IRS gets the 1099S and it is good when the numbers are easy to follow. Your sales price is half the 1099S. Your basis is where the numbers change.

 

List your basis as: half of FMV on date inherited   PLUS half of any sales expenses

List the sale price as: half of $165,000 = $82,500

 

For a comprehensive look at your question, please see this article on home sale. The section that applies to you is farther down.

 

@rjs has added a great answer

{Edited 01/24/2020 | 6:40 PST]

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Level 15
Level 15
Intuit Approved!

My parents transferred their condo to me and my brother in 2002. my parents had a "life lease". Dad died in 2017 and mom died in 2019. My brother and I sold the condo.


@testbutton66a wrote:

How do I put this on my taxes? Lawyer sent me a 1099-s.  Is my share of the condo fully taxable. Do I only pay taxes on the capitals gains on the condo? Parents purchased for 125k, 20k improvement and we sold it for 165k.

165k was the fair market value. Do I claim 10k as capital gains and my brother claims 10k? 


@testbutton66a 

Because your parents had a life estate, the condo is treated as if you inherited it when your mother died, not as a gift, even though your parents transferred the title to you while they were still alive. The basis of inherited property is the fair market value on the date of the decedent's death. What your parents paid for it doesn't matter. If you sold it for the fair market value, you have no gain. (This is common when an inherited property is sold soon after the death.) You might even have a small loss if you paid a broker's fee or other selling expenses.


You only pay tax on the gain, not the entire proceeds of the sale. Since you have no gain, you will not have to pay any tax on the sale. Assuming you never rented out the condo, it is considered personal use, so you cannot claim a loss on it. But even though you will not have to pay any tax, you and your brother must each report it on your tax returns. The lawyer should have sent each of you a 1099-S for half the proceeds.


You enter it in TurboTax as the sale of a second home. See the following FAQ for instructions. You cannot report the sale of a second home in TurboTax Deluxe Online. You will have to either upgrade to Premier or higher, or use any edition of the CD/Download TurboTax software.


Where do I enter the sale of a second home, an inherited home, or land on my 2019 taxes?

 

View solution in original post

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