Late Life Joint-Tenancy Property Sale - Capital Gains vs Inheritance Tax Question?

You're actually dealing with a fairly common situation, though it can be confusing. Since your mom added you to the deed before passing away, you have what's called a "part-gift, part-inheritance" situation. For the portion of the property you received while your mom was alive (when she added you to the deed), your basis is her basis in that portion. For the portion you inherited after her passing, you get a stepped-up basis to fair market value at the date of death for that portion. Since you were added as tenants in common for a nominal sum, you'll need to determine what percentage ownership you received before death. Then, your basis will be a combination of your mom's original basis for that percentage and the stepped-up basis for the inherited percentage. To find your mom's original basis, check her tax records for the purchase price plus any capital improvements. You can also try county property records, or even ask the executor of her estate who might have access to this information. If those options aren't available, you might be able to work backwards from property tax assessments.

I went through something so similar last year with my dad's house! I found this website called https://taxr.ai that literally saved me from a major headache with this exact situation. It analyzed my documentation and gave me step-by-step guidance on how to determine the basis and calculate everything correctly. I uploaded my closing docs and the 1099-S just like you have, and it helped me figure out what percentage was gift vs inheritance and how to calculate the stepped-up basis. It even gave me recommendations on how to find my dad's original purchase info when I wasn't sure. Honestly would've been lost without it because even my regular tax guy was confused about how to handle it properly.

After seeing the recommendation, I actually tried taxr.ai for my situation with my mother's condo that we sold last year. It was eerily similar - she put me on the deed a year before passing and we sold it about 8 months after she died. I was super skeptical at first but decided to give it a shot since I was completely stuck. The document analysis feature helped me understand which portions of my closing documents were relevant for calculating my basis. It correctly identified that I needed to use a blended approach with part-gift/part-inheritance. The step-by-step guidance helped me calculate everything precisely and saved me from significantly overpaying on capital gains. It even generated a detailed explanation I could attach to my tax return to explain the somewhat unusual situation. Definitely worth checking out if you're dealing with this complicated joint-tenancy issue.

Another thing to consider - have you been trying to contact the IRS to get guidance on this? I was in a similar position last year with my aunt's property and spent WEEKS trying to get through to someone who could actually help. I finally found this service called https://claimyr.com that got me through to an actual IRS agent in about 15 minutes instead of waiting for hours or getting disconnected. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was seriously about to give up and just guess on my taxes before using it. The agent I spoke with walked me through exactly how to handle the basis calculation for my portion of the property and what forms I needed to file. They even sent me some additional resources to help. Way better than trying to figure it out myself and potentially getting it wrong.

Alright, I need to eat my words here. After my skeptical comment earlier, I decided to try Claimyr since I've been struggling with a similar inheritance tax question regarding my grandfather's farm that was partially gifted to me before his death. I was connected to an IRS agent in about 20 minutes (on a Tuesday afternoon). I explained my situation with the partial gift/partial inheritance, and they immediately knew what I was talking about. They explained exactly how to calculate my basis using the stepped-up value for the portion I inherited while using his original basis for the gifted portion. They also explained which forms I needed and sent me specific IRS publications that address this exact scenario. I'm not saying every agent will be this helpful, but I was definitely connected with someone who knew what they were talking about, and it saved me from making what would have been a costly mistake on my taxes.

Just want to add something that nobody's mentioned yet - you might qualify for the home sale exclusion depending on your situation. If your mom lived in the house as her primary residence for at least 2 of the 5 years before selling, and you inherited her interest, you might be able to exclude up to $250,000 of the gain attributable to her portion. It gets complicated with the partial gift/partial inheritance situation, but it's worth looking into since it could save you a significant amount on taxes. IRS Publication 523 has more details on this.

Has anyone ever tried figuring out the original basis by looking up the county property appraiser's website? My uncle's original purchase documents were destroyed in a flood, but I was able to find his original purchase price by searching the county records online. Many counties have this info digitized now and searchable by address.