Sale of a House Recently Deeded to Three People

[Michael_Scott]

My mother deeded her house to me and my two sisters in August 2025 shortly before she passed away. We then sold the house for equal shares a few months later in December 2025. We didn’t own the house for very long nor did we reside in it so we are not exempt from paying taxes on the sale. We never received a 1099-S. Based on my research, we are required to report the sale to the IRS and pay capital gains tax on the profit from the house sale, calculated as the difference between the selling price and the home's original purchase price as the house was gifted to us.

First, does this sound accurate based on the circumstances?

Second, as we equally split the sale three ways, we would each only report our portions of the sale. Therefore, when we each list the original value of the house and what we individually made from the sale, a loss would be shown, negating any taxes. This is despite the total sale of the house being for more than the original purchase price. Is this correct?

[Michael_Scott]

EDIT: While we were not provided a 1099-S, we were provided a Substitute Form 1099-S listing the gross proceeds. However, each of our forms only lists the recipient as the seller, so my form only lists me, not indicated that the sale is split three ways. This makes it look that the gross proceeds are linked solely to me while I am obviously not receiving all of the profit from that. So I am unsure what to put on my tax return. 

[KrisD15]

First question is how did your mom deed the house? 

If she used a "Life Estate" it would be treated differently than if she gifted or sold the house to you and your siblings. 

[Michael_Scott]

Thank you for your response. I looked for this information after seeing your message and found that it was deeded through a life estate. I believe that means the original purchase value is not used but the value at the time of death is used. Since the sale was made within months of her passing, I’d imagine very little, if any, taxes are owed. With that said, do you know how I make that determination? 

[KrisD15 · Accepted solution]

Real estate Law is governed by the state, so check with a real Estate Attorney or speak with the Title Company. 

Usually a Life Estate is used to by-pass probate court and is treated the same as an inheritance, so your value (basis) is the Fair Value on date of death and should have produced no gain when sold.