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Sale of a residential rental property

Level 2

Client co-owned a rental with another person (50/50). With permission, client reported 100% of the rental income and expenses including depreciation on his returns for about 10 years. They sold the property in 2020 and each received a Form 1099-s for 50% of the sale proceeds. How to report the sale on each of their returns.

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6 Comments 6
Level 15

With permission from whom?  

Reminds me of when I was 17.  I gave my 21-year-old friend permission to buy beer for me.  

Level 8

Even the Wonky-Donkey wouldn't approve of "getting permission" to handle a tax reporting situation as they see fit. Wish I could just give myself permission to not report income - that would solve a lot of my problems!

Level 15

But it's been done the same way for 10 years and the IRS never sent them a single notice.  That tells you it's all kosher.  Right? 😜 /s

Still an AllStar
Level 15

So did they actually co-own this rental or did someone "lend" the taxpayer money to invest in a rental property? How much did the silent co-owner actually take of the sale proceeds? 

Level 7

i would assume that the sale would be reported on 4797.since irs has not

questioned you i would report 1/2 on each return

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Level 15

Did that one client actually receive 100% of the income and pay 100% of the expenses?

If not, both taxpayers may have 10 years of incorrect tax returns.   Even if the one person did 100%, it could depend on how the title of the property was held, as well as local state law.


Did both people actually purchase/pay for the house 50/50?  Did they actually receive 50/50 of the proceeds of the sale?