Reposrting home sale proceeds for covenants filing separately

[alayneb]

My son and I sold a home we shared for a long-term gain. The 1099-S lists both our names but includes his social security number.  How do we report the sales and resulting gain and exclusions on both of our returns?

We are using the desktop home and business edition

[MaryK4]

Since you are filing separately but both own the home, you must each report your proportionate share of the sale proceeds, cost basis, and expenses on your respective tax returns. The IRS matching system expects the individual whose Social Security Number (SSN) is on the Form 1099-S to report the full amount, so special handling is required to avoid a notice.

Because the 1099-S was issued under your son's SSN, he is considered a nominee recipient for your portion of the proceeds. He reports only his portion (e.g., 50%) of the sale price, basis, and selling expenses in the "Sale of Home" section of TurboTax.  To prevent the IRS from flagging the discrepancy between the 1099-S amount and his return, he should enter the full amount from the 1099-S and then show a nominee adjustment for your share in the "Sale of Home" interview.  If using TurboTax Desktop, he can also use the Step-by-Step guide to reach the Less Common Income > Sale of Home section. He should enter the gross proceeds from the 1099-S but then adjust the figure to reflect only his share.

Report your portion of the proceeds and basis on your own return as if you had received a separate 1099-S.

1. Go to Federal Taxes > Wages & Income.
2. Scroll to Less Common Income and select Start/Update next to Sale of Home (Form 1040).
3. When asked if you received a 1099-S, answer Yes even though it had your son's SSN, and enter only your share of the proceeds shown on the form. 

[alayneb]

I am entering his taxes.  I went through the steps of the Less Common Income > Sale of Home section and never found a place where he could adjust the amount of gross proceeds.  Can you please assist further?

[DianeW777]

Yes, you must enter only your proportionate share of the gross proceeds. If you each owned half of the home, as example, then you split the gross proceeds equally between you and then the cost basis and selling expenses.

If you want to nominee 50% to yourself you can use the method below. However simply splitting everything equally, then you can always respond with the actual information if and when the IRS sends a request.

Nominee Returns.  This is how the IRS knows what you are doing.

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list your son as the payer and the other owner, yourself, as the recipient. On Form 1096, list your son as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy (use the form(s) needed) so if you don't have a color printer, go to the IRS website to fill in and print the forms here: : 

• Form 1096
• Form 1099-S

@alayneb