Sale of deceased parent's home by adult children who were put on deed as joint owners in 2008

[Yannie]

Hello,

Trying to decide if I should try filing my own taxes using TTPremier (?) or just use a tax accountant to file because this tax year 2024 it's a bit complicated and confusing since my siblings and I sold our deceased parent's home.  I would appreciate any insights and help as to how to file if I do it using TT.

The facts are as follow:

1)  Parent's purchased home in 1996 for approximately $188,000

2)  2008 Parents added their 4 adult kids to the deed (only parents lived at home, 4 kids each have own home).

3)  Father (87) passed first from Covid in December 2020 (one sister stayed/lived there to be caregiver between March 2020 to July 2022.  She went back and forth between her own home and parent's home).

4)  Mother (86) passed in July 2022

5)  Sister did not vacate parent's home until March 2024

6)  Parent's home sold in August 2024 for approximately $447,000

7)  Proceeds split evenly between the 4 remaining joint owners / kids approximately $102,000

😎  Did not receive 1099-S (read we should received but have not).

My questions are:

-What is my cost basis or adjusted basis; our R/E agent was also saying something about step-up basis?

-Then online research mentions we need to know the FMV of the home at date of deaths (2020 or 2022)?

-How do I determine the FMV of the home in 2022 (would an online valuation be okay?  Trying to avoid hiring an appraiser if possible.

-I did an online home valuation that gave an average for parent's home value in July 2022 of $404,000; can this value be used for IRS FMV?

-What $ numbers do I need to fill in on Turbo Tax?

I'm sorry this is stated so factual but I didn't want to make reading it so convoluted with unnecessary words and details.  I'd appreciate any help or information.  Thank you.

[KrisD15]

Real estate laws are governed by the state, but the first issue would be "HOW were you added to the deed?".

If it was done as a "Life Estate" this usually means the property by-passes probate court and goes directly to the "remainderman".

In this case, the basis is determined on the Fair Market Value on the date of death for the "life tenant" (your mother).  That is what is referred to as a "Stepped-up" basis, you get to "step-up" the value to reflect the value on the date you inherited the home. 

If, on the other hand, you were added as owners in 2008, your basis would be determined on the Fair Market Value on the date you were added onto the deed. Since real estate usually appreciates, you most likely would have more of a gain in this scenario. 

Title should have issued Form 1099-S. It is not always done.

Any reasonable method to get the basis would be acceptable. Whether that will need to be for 2008 or 2022 depends on how you were added to the deed and if added as owners, what percentage of ownership. Did you each own 1/6th and your mother inherited your father's share? If so, she would get a stepped-up basis when your father died. 

So, yes it could become complicated unless it was done as a Life Estate in which case the only basis you need is the value on the date of your mother's passing. If you used a real estate agent to sell the house, ask them to do a Fair Market Analysis for the date you need. 

The information about your sister living in the home would not affect you, but if there is Capital Gain on the sale, she might be able to use the exclusion if she owned and lived in the home two of the five years prior to the sale. 

[Yannie]

Thank you very much Kris D for replying.

We are in Illinois and they had an attorney add us to the deed.  We were added through a  Quit Claim Deed.  There is no mention or wording about "Life Estate" on the document but there was wordings of "not in tenancy in common, but in joint tenancy with rights of survivorship".  Based on this document, then according to your reply our "basis would be determined on the Fair Market Value on the date you were added in 2008"? Oh well, we were hoping for the other one with basis from 2022 because that would have meant less taxes.

As for the 1099-S, what should we do about it if we can't get one?  Can we continue filing our return just based on the numbers from the closing documents, check proceeds, etc., or is it a must that someone needs to send us one?

[DianeW777]

Yes, file the return using the numbers on your closing documents for the sale. As long as you each report your share of the sale there's no need to be concerned about receiving a Form 1099-S.

You are correct in your understanding that you cannot use the fair market value (FMV) on the date of death because the property was gifted to all of you in 2008.

@Yannie