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Taxes on full rights of survivorship home sale

Forum|Forum|2 years ago
February 29, 2024
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In 2000 my parents transferred their house and land to my brother and I for $1, with a Full Rights Of Survivorship deed. My brother died in 2023 and I am in the process of inheriting his estate (sole beneficiary) . With the approval of the estate lawyer I sold the house and land for <$250K. I haven't lived in that home for many decades, and my brother lived there, paid the taxes, updates, maintenance, etc. What are my federal tax implications, as well as for the state of Michigan, when selling a property I already half owned and just inherited the other half?

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Best answer by DavidD66

Because your parents gifted you and your brother the house and property, your cost basis in the first 50% you received is the same as your parent's cost basis. Your brother's half of the house and property received a step-up and basis, which means the cost basis for that 50% is the value of the property on the date of your brother's death. It was not your primary residence for two out of the last five years, so you are not eligible for any exclusion of gain. You will need to determine your parent's basis in the house and property - what they paid for it (assuming they bought it) plus the costs of any improvements (e.g. additions, remodeling, etc.) The cost basis of the property sold by the estate should be close to, if not the same as (50% of) the sales price. Any loss is not deductible. Any gain will be a long term capital gain. The amount of gain will be included in your Michigan taxable income.

To report your gain in TurboTax:

Type "Investment sales" in the search window and click Enter
Click on "Jump to Investment sales"
On the page with "Did you have investment sales in 2023?" Answer Yes
Answer No to "Did you have crypto income or losses in 2023?"
Skip the import sections and click on Enter another way
On the screen with OK, let's start with one investment type, click on "Other"
Answer No to "Did you get a 1099-B..."
Enter the name of the person or entity that brokered the sale (you can leave this blank)
On the "Now enter one sale for [description]" Indicate "Personal Items" and "Gift" and give a description like "parent's house".
The interview will walk you through entering the details of the sale

D

DavidD66Answer

Because your parents gifted you and your brother the house and property, your cost basis in the first 50% you received is the same as your parent's cost basis. Your brother's half of the house and property received a step-up and basis, which means the cost basis for that 50% is the value of the property on the date of your brother's death. It was not your primary residence for two out of the last five years, so you are not eligible for any exclusion of gain. You will need to determine your parent's basis in the house and property - what they paid for it (assuming they bought it) plus the costs of any improvements (e.g. additions, remodeling, etc.) The cost basis of the property sold by the estate should be close to, if not the same as (50% of) the sales price. Any loss is not deductible. Any gain will be a long term capital gain. The amount of gain will be included in your Michigan taxable income.

To report your gain in TurboTax:

Type "Investment sales" in the search window and click Enter
Click on "Jump to Investment sales"
On the page with "Did you have investment sales in 2023?" Answer Yes
Answer No to "Did you have crypto income or losses in 2023?"
Skip the import sections and click on Enter another way
On the screen with OK, let's start with one investment type, click on "Other"
Answer No to "Did you get a 1099-B..."
Enter the name of the person or entity that brokered the sale (you can leave this blank)
On the "Now enter one sale for [description]" Indicate "Personal Items" and "Gift" and give a description like "parent's house".
The interview will walk you through entering the details of the sale