USA Escrow didn't issue 1099s


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We inherited a house with other 3 siblings and we (4) have equal share. I refinance and bought out the share of other three siblings. Escrow company didn't issue 1099s to 3 siblings who received money for their share. They wanted to report on their taxes and since this is inheritance they more likely just pay taxes on appreciation of the house value from our Mom's death and the FMV of the house when i bought out their share. How can we correct amend this transaction? Please advise. Also when they record the DEED to my name transfer affidavit says its a gift. I'm afraid the 3 siblings will have to pay gift tax in lieu of capital gain of the inherited property.
Essie
 
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Feb 7, 2019
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Hi Essie,

I have a few comments:

(1) The HUD-1 settlement statement can be a substitute 1099-S. But, the important thing is just to file the sellers' returns appropriately. They need the selling price (which they know) and the basis (which as you say got a step-up when you're mother passed away).

(2) Basis would be the date of death FMV unless the property was rented (in which case you would reduce it by depreciation allowed or allowable).

(3) The substance of the transaction will control for gift tax purposes regardless of what the instrument of transfer states.

PM me if you have questions. (I'm a tax attorney; happy to speak off the record).

Best,
Andrew
 

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