Today TaxMama hears from Pam in the TaxQuips Forum with this problem. “My husband and I bought a house for $59.000 five years ago. Our daughter lived in the house, rent-free. Her name was on the title. We sold the house this spring for $48.000. We were issued a 1099 in our name (not our daughter’s) for the sale. There was no mortgage on the house, since we paid cash for it 5 yrs ago. Are we going to have to pay taxes on this sale? How do we handle this sale on our tax return?”
Aaawww, I’m sorry to see that you sold it at a loss. But, at least your daughter had a nice home for a while. The good news is, you won’t be paying taxes on this sale.
You will report this sale on Schedule D. There is a new version of this form this year, which has us starting with a new form – Form 8949. Read the instructions to Schedule D & Form 8949 carefully to see how to report a home sale. It just got a bit complicated.
However, if you’re using tax software, just let it know about the sale of a personal residence and it will ask you the right questions.
Since this was a personal residence (your daughter’s), you cannot get a deduction for the loss. I know it wasn’t your personal residence. But, for tax purposes, the effect is the same. Yes, your daughter should be the one to report it. But since it has your SSN on the form, it’s easier if you do.
And remember, you can find answers to all kinds of questions about selling property and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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