Sale of Inherited Home

[PremierTaxTravel]

Client received a 1099-NEC with box 1 checked for the proceeds on the sale of a home.  He split the proceeds of his deceased wife's home with his step children.  The 1099-NEC is throwing me, is this reported as other income?  

Sorry if this is a duplicate post but it seems as if my last post is in the abyss, waited 30 minutes and it never posted or I'm really impatient.  🙂

[sjrcpa]

1099-NEC and not 1099-S?

If it was wife's home, was the estate listed as the seller on the settlement sheet?

Did taxpayer split the money with the kids because he thought it was right?

Or were they named as beneficiaries in the will?

[PremierTaxTravel]

yes 1099-NEC and not 1099-S 

Just received additional details: The wife's mother owned the house, she passed away, house was passed down to his wife who also passed away, house was then passed to him and his wife's siblings* (not his step children). Sorry for the confusion- I mistook the "children" to be his wife's children and not her mother's children.  

No will and no settlement sheet just the 1099-nec from the attorney.  

[qbteachmt]

"just the 1099-nec from the attorney."

Make them issue a Correction. A 1099-NEC for zero because that form is for Services rendered by a party to their law firm, as if that is self-employment income to your client.

Then, they should issue the right form: 1099-S.

You also need all of the dates of death, and if this is a community property state or common law property state.

[sjrcpa]

If real estate was sold, there is a settlement statement.

[BobKamman]

Are you sure the 1099-NEC is not for his services as executor of the estate?  Is it for the full sales price? 

I'm not sure what community property has to do with this.  Sounds like it was the wife's separate property, even in a community-property state.  (And West Virginia is not community property, which was my first guess about where this happened.)  And with no will, spouses inherit before siblings.  So it does sound like he gifted the proceeds to his in-laws, and the sale should go on his return, if not the estate's 1041.  

And you don't need dates of death, since all inherited property is long-term.  

[PremierTaxTravel]

He said he was not executor of the estate. House went from mother in law, to wife and her siblings.  He inherited his deceased wife's portion.    

[BobKamman · Accepted solution]

The fog is beginning to clear.  Is the amount on the 1099, just his share of the proceeds?  Then it's just a problem with a confused paralegal using the wrong form.  Ask them for a corrected one, showing zero.  Not really his problem if they don't issue a 1099-S, as long as he reports the sale anyway.  

[PremierTaxTravel]

Yes, that's correct just his share of the proceeds.  Thanks so much.  I will have him reach out to the attorney on Monday for a corrected 1099.  I've been down a rabbit hole all morning when I should have trusted myself.