sale of house

[riley0372]

We were in the process of selling a house for my mother in law, so that we could pay for long term care. She passed away before the sale was complete, and the proceeds from the sale became subject to her will. Per her will, 50% of the proceeds from the sale were given to us, and the other 50% was given to her surviving grandchildren. How do we account for our portion of the proceeds from the sale of the house on our federal income taxes?  Any help would be greatly appreciated

[tagteam]

You should consult with local legal and tax counsel. Were there probate proceedings?

Regardless, generally, the property would receive a stepped up basis (to fair market value on the date of death) since the transaction did not close until after her death. 

The proceeds would typically be divided according to the dictates of the will which, in this case would be 50% to you and your spouse (or only your spouse) and 50% to the grandchildren. The basis (stepped up) would also be split 50/50. 

[riley0372]

There were no probate proceedings done on this.  The distribution of the proceeds from the sale were handled by the title company as per the instructions from the will.

[tagteam]

In that event, the title company should have issued a 1099-S to each party who received their share of the proceeds.