My father inherited his parents' home in 1975
upon his father's death. It was sold in 2009
for a capital loss. My dad was 1 of 8
siblings who equally inherited the home. One
of the siblings, my dad's brother, died in
2006 with no will, spouse or children. His
share is being split among the surviving 7
siblings. We received the 1099-s for the sale
of the house as a 2009 form, and figured out
how to file it on a Schedule D. Since the FMV
of the house was more than what it was sold
for, my dad reported a capital loss and owes
no taxes for it. However, my uncle's estate
and his portion of the sale proceeds were not
distributed until 2010. So how do we file the
2010 1099-s form? Will my dad owe taxes on
this portion? On what form do I report the
1099-s? We had to sell at a loss, FMV 1975
was $75000, sale price was $22,500. Property
needed ALOT of work, had fallen into
disrepair, sold to renovated it and flipped
it for $90,000.
From the information you posted, this was not done correctly. The sale of the home should have been reported on everyone's tax return (including the estate) for the year the house sold. There should not be a 1099-S for 2010. If the 8 siblings owned the home together as tenants in common, then the deceased brother's share passed to his estate. From what you posted that is what happened here. The estate apparently still owned his share in 2009 when the home sold. There should simply have been one set of 1099-S forms issued for 2009 because that is the year that the house sold, not 2010.
The estate's basis in your deceased uncle's share of the property would be 1/8 of the fair market value (FMV) of the home on the date the uncle died in 2006. The estate's gain or loss on the sale would be the difference between the estate's 1/8 share of the sales price in 2009 less that FMV of his share from 2006. That probably means that the estate's gain or loss on this property was not all that much. The estate reports that gain or loss on its income tax return (Form 1041) for the tax year that covers the date of the sale. If the estate uses a calendar year, that would be a return ending 12/2009. Depending on the situation, the gain/loss may pass up to the estate beneficiaries. That will be shown on the Forms K-1 that the estate files with the return. A copy of the K-1 then goes to each beneficiary to aid them in completing their individual returns. The K-1 contains the instructions of where everything goes.
I suggest the estate executor see a tax attorney or other tax professional familiar with the income taxation of estates to get this fixed.