Sale of an inherited home that is split by 3 children

[jlhanke1]

In the sale of an inherited home that is split by three children, on each childs return do they put the cost basis as 1/3 of the total or the total?  Each 1099-s shows an allocation of gross proceeds as 1/3 of the total amount. Also, I am thinking the cost basis would be the amount the house was listed for sale at the time of death, so each would list 1/3 of that amount of as the cost basis? The death was on 3/7/2018 and the house sold on 5/31/2019.

[GiseleD]

You are correct to split the basis three ways. However, you will use the home’s fair market value (FMV) on the date of the decedent’s death as the basis for an inherited home. A realtor can likely help you determine the FMV as of the date of death. 

[LFR49]

This answer was so close to my own situation.  Looking to refine the answer.  When the decedent passed, the home passed immediately into ownership to the 3 children.  They were not co owners ahead of this.  On what form do you enter the the difference in fair market value between the date of death and the date of the sale of the home.  Your answer showed death of the person was in march and the sale was in May.  In our case, the sale was in August with virtually the same date death for the decedent.  Do we treat this situation like short term capital gain?

[LFR49]

By the way, I forgot to thank you for the prior answer and give you a thumbs up.  It is hereby given.  👍

[GiseleD]

@LFR49, glad the answer helped!

In your situation, the instructions for making these entries are below. You will need to use FMV on date of death, though. A realtor will be able to help you reconstruct this or refer you to an appraiser for a retroactive appraisal, if necessary.

The holding period for inherited property begins on the date of death, but it is still considered long-term capital gain (or loss). 

To make these entries in TurboTax:

1. Open or continue your return in TurboTax.
2. In the search box, search for sold second home and select the Jump to link in the search results.
3. Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2019? screen.
   • If you land on the Here's the info we have for these investment sales screen, select Add More Sales.
4. Answer No to the 1099-B question.
5. On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale.
6. On the next screen, select Second Home (choose this also for inherited homes) or Land and answer the questions to finish entering your sale.

Original instructions can be found here.