Scenario: Two sister own a house. One sister buys out the other. Sister one refinances the house and all of the proceeds go directly to her (she would then get the 1099S). Sister one has bank check issued to sister 2 for her portion.

Question: Since sister 2 is not getting a 1099S, does she have to claim the income? It would seem to me if sister 1 gets the 1099S, she would be responsible for the entire tax burden.