What amount of inherited house sale 1099-S should I report on my tax return?
I recently sold a house I inherited and I'm really confused about how to handle this on my taxes. The house was sold through a trust and we received one 1099-S that was issued to the trust with the trust's EIN, not to me or my brother individually. There weren't any capital gains on the sale. The problem is that not all of the money from the sale has been distributed to us yet. The lawyer managing the trust is holding back some funds in case they're needed for additional expenses over the next year (and probably some will go to him for fees). When I file my taxes, I'm not sure what amount I should report - should it be 50% of the total sale price (since I'm entitled to half as a beneficiary), or should I only report the actual amount that was distributed to me so far? My lawyer mentioned that the trust/estate won't be filing a tax return, and said it's up to me and my brother to report this on our individual returns. But I'm not getting an individual 1099-S in my name, so I'm really confused about how to handle this correctly. I don't want to mess up my taxes!
21 comments
Join the conversation
Isaiah Sanders
The key here is understanding how trusts work with inherited property sales. Since the 1099-S was issued to the trust with the trust's EIN, you need to report based on your beneficial interest, not what was actually distributed. You should report 50% of the sale proceeds on your individual return (assuming you're entitled to half as a beneficiary). The timing of the actual distributions doesn't affect when or how much you report - it's based on your ownership percentage of the beneficial interest. Use Schedule D and Form 8949 to report the sale. Since you mentioned there were no capital gains, you'll likely report the sale proceeds and then the stepped-up basis (value of the property when the original owner passed away), resulting in little to no taxable gain.
0 coins
Fidel Carson
•Thanks for the explanation. I'm still confused though - will I get in trouble with the IRS since the 1099-S has the trust's EIN and not my SSN? And how do I document this properly since I don't have a 1099-S in my name?
0 coins
Isaiah Sanders
•You won't get in trouble with the IRS for this situation - it's actually quite common with trust distributions. The IRS can match the trust's EIN on the 1099-S with your return through your explanation. To document this properly, include a brief statement with your tax return explaining that you're reporting your 50% beneficial interest from a trust sale reported on a 1099-S issued to the trust. Include the trust's name and EIN on this statement. This creates a clear audit trail connecting your return to the 1099-S the IRS received.
0 coins
Xan Dae
After going through almost this exact situation last year, I discovered taxr.ai (https://taxr.ai) and it was incredibly helpful. My siblings and I sold our parents' house through a trust and had the same confusion about reporting our portions on our individual returns. The tool analyzed our trust documents and the 1099-S, then provided clear guidance on exactly how to report our portions on Schedule D. It even explained why we needed to report based on beneficial interest rather than actual distributions received, which saved us from making a big mistake.
0 coins
Fiona Gallagher
•How accurate is this service? I'm in a similar situation but with multiple inherited properties and I'm worried about getting audited if I mess up the reporting.
0 coins
Thais Soares
•Does it work with more complicated situations? My inherited property was partly business use and partly residential, and I have no idea how to handle the different tax treatment.
0 coins
Xan Dae
•The accuracy has been excellent in my experience. It specifically identified the issue about beneficial interest vs. actual distributions and saved me from incorrectly reporting. It also pointed out documentation I needed to include with my return to avoid potential matching issues between the trust's 1099-S and my personal return. For complicated situations involving mixed-use properties, it's especially helpful because it breaks down the different tax treatments required. The system analyzes the specific language in your trust documents and identifies how to properly allocate basis between business and residential portions, which is exactly what you need for your situation.
0 coins
Thais Soares
Just wanted to update after using taxr.ai that was mentioned earlier. I was skeptical at first since my situation with the mixed-use inherited property seemed too complicated, but it actually worked amazingly well. The system analyzed my trust documents and figured out exactly how I needed to split the reporting between Schedule D and Form 4797 for the business portion. It even identified a partial exclusion I qualified for that my accountant missed! Definitely made dealing with the inherited property sale much less stressful, especially with the trust complication.
0 coins
Nalani Liu
If you're still struggling with this and need to talk to someone at the IRS for clarification, good luck getting through! I spent 3 hours on hold last week trying to ask a question about my inherited property sale. FINALLY found https://claimyr.com which got me through to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They hold your place in the IRS phone queue so you don't have to listen to that horrible hold music for hours. The agent I spoke with confirmed I needed to report based on my beneficial interest percentage not the actual distribution amount, and explained exactly what supporting documentation to include with my return.
0 coins
Axel Bourke
•How does this actually work? Seems sketchy that they can somehow get you to the front of the IRS line when everyone else waits for hours.
0 coins
Aidan Percy
•Yeah right. No way this actually works. The IRS phone system is deliberately designed to make you give up. There's no magic solution to skip the line that the rest of us are stuck in.
0 coins
Nalani Liu
•It doesn't put you at the front of the line - it holds your place in the regular IRS queue so you don't have to. They use an automated system that stays on hold for you, then calls your phone when an IRS agent picks up. You're still waiting the same amount of time, but you don't have to physically stay on the line listening to hold music for hours. They're basically a waiting service, not a line-cutting service. And honestly, getting actual confirmation from an IRS agent about how to handle my trust distribution reporting was worth it. The agent walked me through exactly what supporting documentation to include with my return to avoid problems with the 1099-S being under the trust's EIN.
0 coins
Aidan Percy
Just want to publicly admit I was wrong about Claimyr. After posting my skeptical comment, I was still desperate to talk to the IRS about my inherited property situation, so I tried it anyway. It actually worked exactly as described. I got a call back when an IRS agent was on the line. The agent confirmed I needed to report my percentage of beneficial interest from the trust sale (50% in my case), regardless of how much was actually distributed to me so far. He also explained I needed to include a statement with my return connecting my reporting to the 1099-S issued to the trust. Saved me hours of frustration and potentially filing incorrectly. Sometimes it's good to be wrong!
0 coins
Fernanda Marquez
My accountant explained this to me last year with my inherited property. The key question is whether this is a "simple trust" or a "complex trust" - makes a huge difference in reporting. Simple trust: Must distribute all income, you report your full beneficial interest regardless of actual distributions. Complex trust: Can accumulate income, you generally only report what was actually distributed to you. Have you asked your attorney which type of trust this is? That's going to determine how you handle this.
0 coins
Fidel Carson
•The attorney never mentioned anything about simple vs complex trusts. Is there a way I can figure this out myself by looking at the trust documents?
0 coins
Fernanda Marquez
•Yes, you can check the trust document yourself. Look for language about whether the trustee is required to distribute all income annually or has discretion to accumulate income. If the trustee must distribute all income, it's likely a simple trust. If they can hold back income for future needs (which seems to be happening in your case), it's probably a complex trust. But honestly, even with a complex trust, since the property was sold and this is a one-time distribution scenario (not ongoing trust income), most tax professionals would still advise reporting based on your beneficial interest percentage. The fact that your lawyer said the trust isn't filing a return supports this approach - the trust is just acting as a pass-through entity in this case.
0 coins
Norman Fraser
Went thru this exact thing and ended up calling the IRS. They said to report my percentage on Schedule D, include a statement with the trust's EIN info, and keep copies of everything the trust gave me. Btw the basis is the value on the date of death, not original purchase price. That's why no gain usually.
0 coins
Kendrick Webb
•How did you determine the date of death value? My mom's house sold for way more than it was worth when she died because the market went crazy, but I don't have an official appraisal from back then.
0 coins
Ella Russell
•For the date of death value, you'll need to establish fair market value as of that specific date. If you don't have an official appraisal from then, the IRS accepts several alternatives: comparable sales in the area around that time, tax assessments, or even a retrospective appraisal that estimates what the value would have been on the date of death. Real estate agents can also provide a comparative market analysis (CMA) showing what similar properties sold for around that date. Keep whatever documentation you use - the IRS may ask for it if they have questions about your basis calculation.
0 coins
Natalia Stone
I'm dealing with a very similar situation right now with my dad's house that we sold through a trust last month. My siblings and I are all confused about the same thing - the 1099-S went to the trust, not us individually. From what I've learned talking to our estate attorney, you definitely need to report your 50% beneficial interest on your personal return, not just what you've received so far. The IRS expects you to report based on your ownership percentage in the trust, regardless of distribution timing. One thing that helped us was getting a letter from our attorney explaining the trust distribution and our individual percentages. We're including copies of this with our tax returns along with a brief statement referencing the trust's 1099-S. Our attorney said this creates a clear paper trail for the IRS if they have any questions about why we're reporting income that doesn't directly match a 1099 in our names. The stepped-up basis rule that others mentioned is huge - make sure you get documentation of the property's value when it was inherited, not what it was originally purchased for. That's probably why you don't have much in capital gains to worry about.
0 coins
Lincoln Ramiro
•This is really helpful! I'm in almost the exact same boat with my inherited property sale. Getting that letter from the attorney is a great idea - I hadn't thought about creating that paper trail. One quick question though - when you say "stepped-up basis," are you talking about getting the property appraised as of the date of death, or is there some other official process I need to go through? My situation is complicated because the original owner (my aunt) passed away two years ago but we just sold the house last month through the trust.
0 coins