Do I have to pay taxes on money earned from selling my late mother’s house if it was sold below fair market value?

My siblings and I just sold my mom's house after her death and split it between four. Her house was sold below fair market value (it was in pretty poor condition). I received a 1099-S from the lawyer's office. Do I have to pay taxes on this money? There was no capital gain since the house was sold below fair market value.

By receiving a 1099-S, the sale will need to be reported on the tax return of the recipient of the 1099-S (the Social Security number should match). The gain or loss on the transaction is calculated by reducing the proceeds by the basis of her home and selling expenses. Basis of her home is typically how much she paid for it; but because she died, the basis might be the fair market value of the house at the time of her death. You and your siblings might have a gain or a loss, both of which should be reported on your returns once the calculation of gain or loss is computed.

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Answered by: Jennifer L. Romberger, CPA, EA, is with Long Financial Group Inc. in Blue Bell, Pa.