Top Solvers !!!!! Need your input on this.

Two seperate transactions. 1. The sale of the personal portion the son will not getting any 121 exclusion, since he did not live in the home all and will be responsible for his portion of the gain, if any on the personal portion.

2. The sale of the rental portion; Although the son never benefited from the profit or loss from the operation of the rental property, from the info provided is appears he was a part owner and should report the sale (4797) and any resulting gain or loss shared. Not really fair, but how could he not know of his ownership? he or a reprsentative must have attended the closing. IMO

Did she fill out 709 at time of her gift to son. Sounds like poor planning.

People, people, people.

"Substance over form."

Repeat it three times and it's yours.

We don't really have enough facts and circumstances, so no one should jump to conclusions.

But sometimes, the name on the deed is not the owner of the house. 

Occasionally the name on the 1099-S is not the actual seller.

Why didn't the son just deed the house back to Mom, before the deal closed?  (Well, OK, people who practice hillbilly probate aren't always the brightest bulbs.)  Or maybe the son is in a 0% bracket, and Mom is at 30% with state taxes and also looking at higher Medicare premiums.  Does that change your answer?