Top Solvers !!!!! Need your input on this.

[athaureaux6]

Hi online community, 

Taxpayer sold a two-family owner-occupied home. Half of the house was rented. Years ago, when she bought the house, her son was added to the deed and all the documents but never lived in the house at any point and never received anything from the rental income, etc. Both received a 1099-S. How is this reported from the son's side? Your comments are really appreciated. Have a great day everyone. 

[Camp1040]

Two seperate transactions. 1. The sale of the personal portion the son will not getting any 121 exclusion, since he did not live in the home all and will be responsible for his portion of the gain, if any on the personal portion.

2. The sale of the rental portion; Although the son never benefited from the profit or loss from the operation of the rental property, from the info provided is appears he was a part owner and should report the sale (4797) and any resulting gain or loss shared. Not really fair, but how could he not know of his ownership? he or a reprsentative must have attended the closing. IMO

[Terry53029]

Did she fill out 709 at time of her gift to son. Sounds like poor planning.

[George4Tacks]

Son owns half the home? How was he added to the deed? 

I think the rental may be half to the son, but all depreciation stays with Mom and all depreciation recapture belongs to her. 

[kobe22]

Hi there,

So transaction 1 is understood. (son will be taxed on any gains)

Transaction 2 however, Form 4797 will again tax the same gain produced in transaction 1? (so it is double taxed)

[Camp1040]

The 1099-s  amount would be apportioned between the rental half and the personal half with adjustments mentioned by @George4Tacks  no depreciation adjustment.

[BobKamman]

People, people, people.

"Substance over form."

Repeat it three times and it's yours.

We don't really have enough facts and circumstances, so no one should jump to conclusions.

But sometimes, the name on the deed is not the owner of the house. 

Occasionally the name on the 1099-S is not the actual seller.

Why didn't the son just deed the house back to Mom, before the deal closed?  (Well, OK, people who practice hillbilly probate aren't always the brightest bulbs.)  Or maybe the son is in a 0% bracket, and Mom is at 30% with state taxes and also looking at higher Medicare premiums.  Does that change your answer?