[gepetto101]

To reduce her assets, my mother transferred titled to her house to my two brothers and me. We held the property for a little over a year and ultimately sold it. I believe that everything will be divided three ways (please correct me if I'm wrong). What basis do I use for the house?

[ebaines]

Yes, you split the cost 3 ways, as well as the proceeds when you sell the property. I assume that all 3 of you have your names on the deed - is that right?

Since the house was a gift to you, the basis depends on whether the fair market value of the property as of the date she gave it to you was greater than or less than her own adjusted cost basis. The term "adjusted cost basis" means her original cost basis (her original purchase price) plus her closing costs and any capital improvements she may have made, plus any gift tax she may have paid when she gifted the property to you.

1. If the FMV was greater than her adjusted cost basis then you use her adjusted cost basis as your own. If she held the house for more than 5-10 years you will probably find that this is the case.

2. If the FMV on the date she gave you the property was less than her own adusted cost basis then it gets more complicated, as your cost basis will depend on how much you sell the property for. There are three possible cases:
a. If your selling price is above your mother's adjusted cost basis you have a gain and use her adjusted cost basis as your own.
b. If your selling price is below the FMV on the date of the gift you have a loss and use FMV as your basis.
c. If the selling price is between FMV and her original cost basis you have neither a gain nor a loss.

In either event you will need a good record of what the FMV was when you received the gift from your mother - you should consider hiring a professional appraiser to help you figure detemine a reasonable value. And if she hasn't already done so, your mother should make her records available to you so you can determine what her adjusted basis cost basis was.