Sale of inherited house

[mgzsak]

When my wife’s bother died he left his house to both his surviving wife and his sister (my wife), split 50/50.  He had purchased the house before getting married and never updated the deed to include his wife’s name, instead indicating in his will that the house be split between his wife and his sister.

It took a while (over a year) to get the house in a condition suitable for sale.  While getting the house ready for sale his surviving wife lived in the house most of the time.  There was some significant work that had to be done to the house, such as mold removal, structural repairs, building code compliance, etc.

My wife and I file are taxes as married filing jointly and I use TuboTax Deluxe to prepare our taxes.  While working on our taxes ran into a couple of questions I’m hoping to get help with:

• How do I enter the sale of an inherited house in TuboTax and in addition to the sale price are the expenses of getting the house in order and closing costs entered in TuboTax?
• The house was in NJ and my wife and I are residents of MD.  Does she (or we) need to file a tax return in NJ and will she have to pay tax on the sale of the house?

[Mike9241]

who name was on the 1099-S

you got 1/2 of the proceeds so that's your sale price (hopefully each seller got a 1099-S for 1/2 the proceeds)

then there were the fixer-up costs which add to your original basis (again I assume each party paid half).  your original basis is 1/2 the Fair Market Value on the date of death.   your share of selling expenses would also be 1/2 of what's on the closing statement.

the sale gets entered on a 1099-B worksheet  for date acquired enter "inherited" without the quotes. no sales date is required. 

[mgzsak]

My wife did not receive a 1099-S.  Only documentation we have related to the sale of the house is a copy of the HUD-1 Settlement Statement.  The sale was a cash sale, if that makes a difference.