Is the proceeds from sale of real estate transaction taxable if there's quitclaim deed subject to life estate?

[mpa808]

Mom passed away and children sold the house.

They received form 1099-S Proceeds from real estate transactions with information attached regarding quitclaim deed (subject to life estate).  Will the transaction be taxable or it is treated as inheritance?

Thank you.

[qbteachmt]

Who are the parties on that deed? Who was given the life estate? What are the dates of these documents?

Details always matter.

Example: Dad gifted each child a portion via that deed 10 years ago, but Mom got to live in the house until death.

What you need to investigate with these documents is when ownership is legally transferred. If it was inherited upon death, then sold, that will be different than if the kids owned it for 10 years, already.

[BobKamman]

They received a 1099-S, did they also receive a check when the house was sold?  Did they have to sign a deed at that time?  Your question sounds like information is coming from the wife when it was the husband's mother who died, and he might not have told her all the details.  

[mpa808]

1st quitclaim deed was recorded in 2012 where mom gave 20% each to her 3 daughters.

2nd quitclaim deed (subject to life estate) was recorded in 2016 where mom gave her share of 40% to two sons.

Mom passed away in 2022 and the house was sold.  Each child received a check for the sale of house.  Mom lived in the home until she passed.  Her children have their own homes.

Thank you.

[qbteachmt · Accepted solution]

OMG, where do people get their guidance when it is this bad? Sheesh.

Okay, you have two conditions.

I found something that covers both, for your consideration:

http://accessiblelaw.org/Documents/LifeEstates-Inheritances.pdf

So, for the daughters, it looks like, "it depends." I would find out if they handled gift tax for those deed transfers, or not.

[BobKamman]

Sons get stepped-up basis. Daughters probably don't unless they were joint tenants with right of survivorship. 

[qbteachmt]

Bob, you should read that link I gave. You like to teach about successfully argued points of tax code. It appears the daughter might have a fighting chance.

[BobKamman]

Some things people should know without consulting secondary sources.