Rental property sold with ex husband

[Czaffani]

i sold a rental property that i had with my ex husband, but he declared 100% of the income and expenses on his tax return every year. I never declared on my tax return. But when we sold i received a 1099-s with 50% amount of the sale price. In this case, how should i proceed?

[ThomasM125]

Since you did not receive any of the proceeds, you are not required to report the sale. However, since the IRS received the form 1099-S reporting the sale, it might be wise to report it to avoid a query from the IRS about it later on.

The best way to do this would be to report it as the Sale of Home in the Less Common Income section of TurboTax, using the Income and Expenses tab in the Federal section of TurboTax. You will enter the amount reported on your form 1099-S as both the sales proceeds and cost basis.

To be technically correct, you would need to report the sale by creating a rental property in TurboTax and then reporting the sale of it. However, this would not be appropriate since you didn't actually rent it out this year, so it would be difficult to answer the questions in that section accurately.

The goal is to get the form 1099-S amount reported on your tax return, and the home sale entry will accomplish that.

[Czaffani]

My case is that I owned this property with my ex-husband and i decided to purchase his part. We did a sales contract and i was seller and buyer at the same time. To remove his name for the property i had to buy the property (that i already owned 50%). The title company issued me a 1099-s for 50% amount. I actually never sold the property, this process was done to remove his name from the title.

How should i declare this in my tax return?

[RobertB4444]

@Czaffani  So you bought out 50% of the rental home you owned with your ex and then the title company issued you a 1099-S for fifty percent of the proceeds that you paid?  That's wacky.

First, you should notify the title company and ask them to fix it.  If they refuse to do so you have other options but I sure wouldn't work with anyone like that again.

If they won't correct the 1099-S to show all of the proceeds as your ex husbands then you need to issue him a 1099-S from you to him for the amount that the form shows you received.  

Here is where you prepare 1099 forms using TurboTax.

Shouldn't have any effect on his taxes because he knows how much he received regardless of the 1099-S that he got so he should have the full amount on his tax return.

[Czaffani]

I spoke with the title company and they are not willing to correct the 1099.

I will have to fix it on my side. I was not able to find where to issue this 1099 to my ex-husband. I plan to prepare my tax return this weekend using turbotax. I file my tax jointly with my husband. Can you help me?

[Vanessa A]

You don't know where to issue because you do not know where he is?  If so, then you can send it to his last known mailing address and maybe he has his mail forwarded. 

More importantly, you are sending it to the IRS to cover your basis, so even if you don't have your ex-husbands current address and you do send it to his last known address, the IRS still has record that you officially are saying that half of the money was his. This is more for you than for him.

Whether or not you can figure out where to send it to him, you would still only need to report half of the 1099-S on your return since only half of it belonged to you. 

[Carl]

I'm not sure here, but if you closed on the buyout from the ex after the divorce was finalized, that may be considered a reportable transaction.(Buying real estate doesn't increase your federal tax liability. Selling real estate usually will.)  It depends on how things are worded in the divorce decree or any other legally recognized separation paperwork.

Same is possible if you closed on the sale of the property after the divorce was completed.

[Hal_Al]

You have an erroneous 1099-S. If you received an erroneous 1099, you have several choices (I would do #4):

1. Ideally, you get a corrected 1099-S from the payer
2. Don't report it on your return. Attach a copy of the 1099-S and a statement explaining the circumstances. You can't e-file. From the IRS instructions for form 1099-Misc: Form 1099-MISC incorrect? If this form is incorrect or has been issued in error, contact the payer. If you cannot get this form corrected, attach an explanation to your tax return and report your income correctly.
3. Report the income as misc line 8z, Schedule 1 income  Then enter a line 8z deduction, for the same amount.  In TurboTax (TT), enter at:
   - Federal Taxes tab
    - Wages & Income
   Scroll down to:
   -Less Common Income
         -Misc Income, 1099-A, 1099-C
          - On the next screen, choose – Other reportable income -  Answer yes to Any other Taxable Income -On the next screen, Enter the number. Briefly explain at description. Call it something like "Erroneously issued 1099-S".                                                Then, enter it again except with a minus (-) in front of the number.  Call it something like "Erroneous 1099-S adjustment"

4. In TurboTax (TT), enter the 1099-S  at:
   - Federal Taxes tab 

    - Wages & Income

   Scroll down to:)

   -Investment Income

      -Stocks, mutual funds, Bonds, Other (Real estate is other). Enter your cost basis as the same amount on the 1099-S; resulting in 0 gain or loss

5. Do nothing and hope you can explain it away when & if the IRS contacts you