How do you Report the Sale of a Rental Property by 2 owners with a 1099-S issued to each owner for full amount?

[AB]

The Rental Property was owned by a brother and sister and sold in 2022 for a total of $230K.

Each owner was issued a 1099-S for the full amount of the Proceeds $230K.

Where is the adjustment made on the 4797 for the co-owner's cost and gain on sale?

Is it form 4797 part III line 21 or is there a different way? Used the asset entry for and entered it in disposition asset gain or loss basis.

Thank you!

[IRonMaN]

Either it was really sold for $460K or the 1099S forms are wrong.  

[BobKamman]

Were both names on both 1099-S forms?  Escrow company might have thought they were husband and wife.  

[AB]

Hi Bob,

Unfortunately, they were not. Each was issued a 1099-S for the full amount of the sale. I can come up with the correct gains by adjusting the cost basis. I believe this is the best way, since if I report the correct amounts, there will be IRS correspondence. Do you agree?

[AB]

Unfortunately, the 1099-S are incorrect.

[Just-Lisa-Now- · Accepted solution]

If you cant get the 1099S's corrected, Id go with your plan to adjust basis to create the correct gain/loss on the sale.

[AB]

Thank you!

[BobKamman]

I haven't seen any reports of cases where IRS matches 1099-S amounts to returns.  That doesn't mean it's not happening, but even the "Automated" Underreporter system involves human review of every case before a notice is sent.  I realize I am in a minority when I refuse to play "trick the IRS computer," but I just don't like signing a return that has an incorrect cost basis just because the 1099-S is wrong.  I would report the sale as "50% interest in co-owned property" and attach an explanation -- it won't be read when the return is filed, but there's a good chance someone will read it if the automatons notice a discrepancy.