Sale of primary residence

[kerdman58]

My deceased husband purchased a home in 1992 for $145,000.  We were married in 1995.  In 2018, my name was added to the deed ( joint tenants with right of survivorship ).  My husband passed in 2019 and in 2020, the deed was transferred to me.  I do not have the original paperwork from the initial purchase.  I obtained the purchased date information from the county website.  I sold the house in 2022 for $375,000, so the gain was less than $250,000.  Can I use his purchase price of  $145,000 for the cost basis when making those calculations?  Do I have to report the sale on my 2022 Federal Income taxes?  

[GeorgeM777]

No.  Because you owned the property jointly, with rights of survivorship, you have what amounts to a qualified joint interest.  Therefore, you receive a step-up in basis.  This analysis can get somewhat complicated.  Thus, here is IRS guidance on how to determine the basis in property held as JTWROS when one of the joint tenants has passed away.  

Qualified Joint Interest

Include one-half of the value of a qualified joint interest in the decedent's gross estate. It doesn't matter how much each spouse contributed to the purchase price. Also, it doesn't matter which spouse dies first. 

A qualified joint interest is any interest in property held by married individuals as either of the following. 

• Tenants by the entirety. 

• Joint tenants with right of survivorship if the married couple are the only joint tenants. 

Basis. As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Decrease the cost by any deductions allowed to you for depreciation and depletion. Increase the reduced cost by your basis in the half you inherited. Farm or Closely Held Business

Below is a link to IRS Publication 551 from which the above information was obtained.

Even if you eligible for the capital gain exclusion, you still need to include the sale of your home on your tax return.

Basis of Assets at page 10. 

@kerdman58

[kerdman58]

yes, it is complicated.  Prior to reaching out, I did read publication 551.   As far as I understand, there was not any depreciation or depletion associated to the residence that would adjust the cost.  There is also the matter of the FMV at the time of my spouses passing in 2019.  If acceptable, Realtor.com provides several sources and Zillow also provides a reference.  What I've concluded from all of this information:  My basis would be half of the purchase price ( 72, 500 ) plus half of the FMV ( 335,300- Zillow) at his passing ( 167,650 ) which equals $240,500.  Am I understanding this information correctly?

[GeorgeM777]

Yes, assuming the FMV valuations are reasonable, your analysis is correct.  Just an FYI, adding the two numbers you provided--$72,500 plus $167,650--we see a total of $240,150.    

@kerdman58