@scocpm wrote:
So just to be clear if I inherit a home I do have to fill out IRS form 8949 for the sale of the inherited home when it’s sold?
What happens if home sells for less is that a capital Loss?
I don't believe your probate costs add to the basis. Probate is a personal legal expense, and even if this property is the only asset in the estate, I don't believe your costs add to the basis. However, basis is discussed here https://www.irs.gov/taxtopics/tc703 and in IRS publication 551, you may want to look yourself. If probate costs were to be allowable as adjustments to basis, you would have to allocate your costs proportionately to the entire estate (house, contents, and any money or investments).
Yes, you have the sale of a capital asset and you report the sale on schedule D and form 8949. You can't deduct losses on personal property, but as long as you never lived in the home or used it for personal use, and you sell it fairly quickly, you can call it investment property and the IRS will probably allow it in the unlikely event of an audit. (Example, this is your mother's lake house. All the aunts, uncles and cousins take turns at the lake house for one last summer, before you sell. That's probably enough to make it personal and not investment property.) You can deduct capital losses against other capital gains. If you have no other capital gains, you can deduct $3000 of capital losses against ordinary income and carry the rest of the loss forward to the next tax year.
Depending on your gain or loss on this home, and any other investments you might have and how they have performed, you might sell other investments to offset a gain or take advantage of a loss, but that's something to discuss with a financial planner.
