Level 5

Sale of Home

Forum|Forum|4 months ago
February 27, 2026
3 replies
12 views

I have a client whose name is on the closing document for the sale of her father's home. At the time of her mother's death in 2020 the deed was updated to include both my client's name and her father's name and removed the deceased mom's name. Now that her father passed November 2025 the house was sold in February 2026 for $230K. This most likely will not generate a Form 1099-SA for the sale as it is below $250K proceeds. The will states that the home be split between the 5 beneficiaries which are her and her 4 brothers. The attorney who did the deed change back in 2021 and is handling the estate of her father transacted the sale in my client's name only despite what the will states for ease. Long narrative to get to my question. Will the sale of this home trigger a tax liability for my client? According to my understanding since the intent of the transaction is this is inherited property as the result of the passing of her father and the value of the home should be at the stepped up basis (Home sold within 3 months of her father's death) and there should be no taxable gain for my client. She is going to follow the intention of the will and distribute the net proceeds to the other beneficiaries. My client wants to hold back some of the funds to cover a potential tax liability from this sale. I believe there should not be any tax liability from this transaction as my client never lived in the home, did not pay for the home nor ever pay for any expenses for the home. The home was 100% her parents and then her father's despite her name being on the deed. Is there any publication related to the sale of an inherited home and what basis to use. Other relevant information, her parents bought the home in August 2016 for $140K and did some minor improvements over the last 9 years to the extent of a new roof, flooring and bathroom renovations which we don't have a cost on yet but will obtain if needed? My belief is this is inherited property and the cost basis should be the stepped up basis at the time the father passed in November 2025 and not the original cost of the home.

Can someone please guide me to an IRS publication or other tax information addressing this matter.

Thanks for your assistance. Happy Tax Season!

Tax Talk

A

AnmarieAAuthor

Level 5

Further information as there was not mortgage on the home from the original date of purchase to the date of sale. No mortgage was ever entered into on this property obligating the deed holders to any debt.

T

TaxGuyBill

Level 15

@AnmarieA wrote:

my client never lived in the home, did not pay for the home nor ever pay for any expenses for the home. The home was 100% her parents and then her father's despite her name being on the deed.

her parents bought the home in August 2016 for $140K and did some minor improvements over the last 9 years to the extent of a new roof, flooring and bathroom renovations which we don't have a cost on yet but will obtain if needed?

This most likely will not generate a Form 1099-SA for the sale as it is below $250K proceeds

The issue is if she was considered a 'regular' owner or not, and the answer to that determines if only half gets a Step-Up or if it gets a full Step-Up.

At first glance, that seems to likely be an "Implied Life Estate". You can Google it for more details. *IF* it is an Implied Life Estate, then as you said, it gets the full Step-Up in Basis.

If it gets the full Step-Up in Basis, the rest of the costs don't matter.

Being under $250,000 of proceeds has nothing to do if a 1099-S won't be issued. Most likely one should be issued.

A

AnmarieAAuthor

Level 5

Thank you TaxGuyBill. I will read more on the "Implied Life Estate" rules but it does appear to apply. My client and her parents never had a written arrangement but it was never implied that she be the owner of the home but rather it was suggested by the attorney putting her on the deed to ease estate planning. Not sure why they did not put the house in trust which may be because IOWA where the house resides and my client is in ILLINOIS may have lower probate thresholds but no one is sure and the attorney who handled the closing of the home works at the same law firm that handled the deed changes in 2020 and has no explanation why it was handled this way.

Thanks for your reference and appreciate you for taking time out to respond to my question.

BobKamman

Level 15

"This most likely will not generate a Form 1099-SA for the sale as it is below $250K proceeds."

Well, that's true if she lies and says it was her principal residence. There are several ways that the deed could have been "updated" to "include her name." For example, giving it to her and reserving a life estate for the father, so that he would qualify later for taxpayer-funded assisted living and the kids could sell the house and go on a cruise. There's really not enough information here, to know what form of "hillbilly probate" they intended. But the will has nothing to do with nonprobate assets, so we don't need that red herring to be dragged across the 1040.

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