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

by Jennifer L. Romberger, CPA | Jan 08, 2019

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.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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