House sale - proceeds 2022 and future proceeds

[Strongsilence-CPA]

House deeded to son in 1998.  Cost 40K, FMV 800K. (Gift tax unknown)

House sold in 2022 for 750K.  The 2-year use requirement not met.

1/2 of the sale price was received in 2022 and reported on 1099-S.  Per a legal agreement (made several years before the sale), 1/2 of the sale price will be received in a future year upon the passing of the owner-mother of son.

This could be an installment sale.  There could be a world of tax when the other 1/2 is received.

I suppose I need the legal agreement before I make a final tax determination. But as of now, the future is the future.

[IRonMaN]

I'm curious ------ like usual.  Where did the other half of the sales price go in the meantime while waiting for mom to pass away?

[Strongsilence-CPA]

Thanks for responding. The taxpayer received it.

[PhoebeRoberts]

Who the heck in this scenario is your taxpayer? I have BTDT with situations where I know everyone involved and the real facts are so complex that I have to simplify, and in the simplification leave out the essentials - and I think that's the confusion here.

Dad gifted real estate to Son in 1998. For 24 years, Son owned the property and rented it out? Let Mom and Dad continue to live in it? At some point, Dad died?

Son sold this same real estate to Mom? or an unrelated third party? in 2022, pursuant to a pre-existing contract that allowed Mom to retain half the sales price for the rest of her life, for a price lower than its 24-years-earlier FMV? Was that price current FMV?

IRonMaN's question is "Who's holding on to the share that Son will get when Mom dies," and I think the answer is "Mom, who is also Buyer."

[qbteachmt · Accepted solution]

"House deeded to son in 1998."

Is your taxpayer the mother of this person?

"House sold in 2022 for 750K.  The 2-year use requirement not met."

Then it sat empty? If it was rented, who was reporting that activity?

"1/2 of the sale price"

You mean, the Payment. The funds, not the price.

"was received in 2022 and reported on 1099-S."

Is this half amount the total reported on the 1099-S? In other words, it was not sold for $750k? Or, the 1099-S split the sale to two parties, each being reported for half the sale proceeds?

"Per a legal agreement (made several years before the sale),"

What sort of agreement overrides the deed/title and a legal sale?

"1/2 of the sale price will be received in a future year upon the passing of the owner-mother of son."

It seems the mother sold the son's house, and kept half the proceeds?

"This could be an installment sale."

Between which parties? A buyer buys from the owner. Where does the mother fit into this?

"There could be a world of tax when the other 1/2 is received."

Or, you have a sale, then the son loaned money to the mother, and there is no house or property involved in that activity?

"I suppose I need the legal agreement before I make a final tax determination. But as of now, the future is the future."

No. Reality matters.

[qbteachmt · Accepted solution]

Is your taxpayer the mother of this person?

"House sold in 2022 for 750K.  The 2-year use requirement not met."

Then it sat empty? If it was rented, who was reporting that activity?

"1/2 of the sale price"

You mean, the Payment. The funds, not the price.

"was received in 2022 and reported on 1099-S."

Is this half amount the total reported on the 1099-S? In other words, it was not sold for $750k? Or, the 1099-S split the sale to two parties, each being reported for half the sale proceeds?

"Per a legal agreement (made several years before the sale),"

What sort of agreement overrides the deed/title and a legal sale?

"1/2 of the sale price will be received in a future year upon the passing of the owner-mother of son."

It seems the mother sold the son's house, and kept half the proceeds?

"This could be an installment sale."

Between which parties? A buyer buys from the owner. Where does the mother fit into this?

"There could be a world of tax when the other 1/2 is received."

Or, you have a sale, then the son loaned money to the mother, and there is no house or property involved in that activity?

"I suppose I need the legal agreement before I make a final tax determination. But as of now, the future is the future."

No. Reality matters.

[Strongsilence-CPA]

In rushing I have had to simplify. So I apologize.  There is a lot more to it that I can't detail at this time.

BTDT?

[PhoebeRoberts]

Been there, done that. The issue is that none of us have any idea what's going on, so are of zero help in figuring the tax presentation.

[qbteachmt]

"In rushing I have had to simplify."

Uh, it's the opposite of simplify. It's a bit of a perspective mess, right now.

[TaxGuyBill]

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@Strongsilence-CPA wrote:

 in 1998 ... FMV 800K ... House sold in 2022 for 750K.

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The house dropped in value?

As the others mentioned, there are many things that don't quite make sense, so there seems to be much more to this story.