MIL's home inherited by my wife on date of her Mother's death.
My wife's Mother made out a Lady Bird deed with my wife as the sole beneficiary before her death. We all live in the state of Texas.
Her Mother passed away on July 31, 2025. As I understand it, my wife's basis in the house is the FMV on date of her Mother's death? We have not got it appraised. However, in September of 2022 we asked a local realtor her opinion of the FMV, that is what it would sell for then. The realtor sent us a letter with her opinion of its FMV.
The local tax assessor/Collector sends out annual notices of real estate taxes due and appraised value of the property. The total value assigned to the property for 2025 from the tax assessor/collector is about $35,000 less than the value the local realtor had appraised the property for in 2022. I believe the realtor's opinion is more accurate than the local tax office's. Here's why:
The house sold for $900 less than the realtor's appraisal. The realtor inspected the property, going inside the house. She's up on what houses are selling for in the specific area where the house is located. The tax office doesn't go inside the homes it appraises. I've noticed over the years that our local tax office routinely seems "off" on appraisals because it doesn't go inside the house to consider remodels and installation of new heating/cooling, new flooring, capital costs to level a home, etc.
Bottom line, I have an unofficial appraisal by a realtor from 2022. The house sold in Feb, 2026 for $900 less than that appraisal. I also know the value of the property on the tax office's rolls from 2025. That value is $35,000 less than what the house sold for. The $35,000 is 22.5% of the total sales price, materially "off" of it's actual FMV.
I believe I can defend the realtor's opinion of value of the house at time ownership passed to my Wife from her Mother if ever audited. It was only six months later when the house sold. (We had to do some repairs and get the foundation leveled before it was sold) The FMV didn't change hardly at all. It sold for $900 less than the realtor's valuation in 2022. And the house was on the market for only a couple of months. People wanted to buy the house for the asking price. There was no negotiating the price down. For that reason, I think the asking price was probably below what it could have sold for.
In this scenario, there is no gain on my wife's cost basis. There's actually a non-deductible loss of about $8,000. We paid $7,250 to get the house leveled and $750 for a land survey. This is what I plan on reporting in 2026, no gain on sale.
What do you think? Is my thinking on this reasonable?
