Sale of Inherited Property - Tax Question

[cmv261]

Hi

My mother passed 10 years ago and her widowed husband decided to sell their house in 2021.  The proceeds were split 50/50 between her widowed husband (50%) and me and my two sibilings (50%).  Which TurboTax program would work best for this situation?  Also, the tax will be on the difference between what the home was valued at the year she passed and the sale price, yes?

[Anonymous_]

Was this a gift (i.e., did her widowed husband give you and your two siblings 50% of the proceeds)?

Typically, the husband here would have received a stepped up basis when your mother passed. Whether it was a full step up or just your mother's one-half would depend upon the status as either community property (in a community property state) or some other form of tenancy in a common law state.

[cmv261]

It is a community property state (Texas).  We were unaware that her husband was going to sell it.  The realtor contacted us that it was being sold and that she was still on the deed.  We received the 50% as next of kin as told by the realtor. 

[Anonymous_]

Yes, I understand but how was title being held between your mother and her husband?

[cmv261]

The title/deed was under both of their names. 

[AmyC]

Premier. Let's start at the beginning and work through. First, did the husband inherit the house or did the husband and the siblings all inherit the house?

• If husband inherited the house, then he just gave you money from the sale. He has the 1099-S and reports it on sch D.
• If you all inherited the house, you each get a 1099-S with your portion of the sales price. The sale is reported on sch D.

The basis of the house is the value on date of death. You may be able to use the tax assessor's office or know some local real estate agents that can provide a better basis. Included in the basis will also be your share of the selling expenses. See Where do I enter the sale of a second home, an inherited home, or land on my 2021 taxes?

You can see all the forms and products here, just scroll down. 

[Anonymous_]

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@cmv261 wrote:

The title/deed was under both of their names. 

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If the title was held as joint tenants with rights of survivorship, then there is no "inheritance"; title to the property would have passed by operation of law upon the death of your mother to her husband. 

If that is the case, then the proceeds from the sale are essentially a gift from her husband to you and your siblings. 

You might want to contact local legal counsel for this matter but, regardless, whether you and your siblings "inherited" the property will be dependent upon exactly how title was held (and/or any language in the deed).