Sold inherited second home

[wi21]

In 2013 two brothers inherited their mother's home through quit deed. The house was sold in June of 2020 for more than the market value listed in 2013. The sale/title paperwork has a total market value, that I'm assuming we can list half as basis on our taxes - the other brother will list the other half. A 1099-S was sent to us for our share of gross proceeds of the sale, and I've used the investment section not 'main home sale' in turbotax. Is it true that we take the fair market value at 2013 at the time of the quit deed and NOT when it was originally purchased in 1956?  Does anyone have any experience with Wisconsin forms -- seems turbotax doesn't allow for the extra provision for WI taxes and a separate form has to be manually uploaded in order to file electronically.

[tagteam]

The threshold question for you is whether the brothers inherited the home or whether their mother gifted them the home while she was still alive via a quitclaim deed.

[wi21]

The mother quitdeed the home while she was alive -- that was in 2013. The home was sold in June 2020. She passed in December of 2020. 

[tagteam]

In that instance, the two brothers would take the mother's basis, unless a case could be made that she retained a life estate (aka implied life estate, in which case the basis would be the fair market value on the date of death).

[wi21]

Hmmmm...but how could we use the basis at date of death, when that was after the house was sold -- albeit in the same year.  We would love for the basis to be the amount in 2020, but the basis going all the way back to 1956 and the selling price in 2020 are quite far apart.  In term so of our own taxes -- do we automatically claim half knowing that the other brother is claiming the other half?

[wi21]

the quit claim deed DID state a life estate, but the house was sold before she died as she needed to go to assisted living -- died 6 months later.  

[tagteam · Accepted solution]

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@wi21 wrote:

the quit claim deed DID state a life estate, but the house was sold before she died as she needed to go to assisted living -- died 6 months later.  

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In that instance, you will need professional assistance. The proceeds would be divided between the mother, as the life tenant, and the brothers, as remaindermen, according to IRS actuarial tables.

See https://www.irs.gov/retirement-plans/actuarial-tables

Consult a tax professional and, perhaps, legal counsel.