Can someone check my logic on this. 

 

This is to revisit the issue where my client's mom got questionable advice years ago.

 

My client's mom sold her principal residence in 2022 and would have qualified for the home buyer exclusion.  The issue though in 2015 the three children were added to the deed. So starting in 2015 the house was owned 25% by the mom and 25% by each of the three children. There were four 1099-s issued in 2022, each for 25% of the proceeds.  I am not preparing the mom's return, who is still alive.  I am just preparing one of the  three children's return.

 

Here are what I think are the key factors

 

- 1962 House built.. with imporovents total cost was 65,000

- Dad on title only in 1962, mom not on title

- 1989, mom and dad got divorced, as part of settlement, mom got house.. dad removed from deed, so      mom sole owner in 1989.

- 2015 - each of the three kids added to the deed.

- FMV in 2015 say was 265,000, increase of 200,000 over basis in house

- 2022, house sold for 332,000

- each 25% owner received 1099 for $ 83,000

- looking to establish basis for my client, one of the three 25% children

- would this be proper math/logic for the basis:

 

- 65,000 cost divided by four to get first figure of 16,250

- then add to that 25% of the increase in FMV from 1962 to 2015 (265,000 - 65,000) / 4 = 50,000, add't     step up

- so new total basis  16,250 + 50,000 = 66,250

Does this sound right?