I am filing the return for the Estate of my late mother in law. She passed away in July 2023 and in December we sold her mobile home at an auction. It was in a very rural area so not a lot of opportunity to sell it through a realtor at full expected market value. It was purchased in 2014 for $45k, and sold for ~$25k, less ~$2k fee to the broker. TurboTax business says the basis for the person (my spouse) who inherits it is the FMV at the time of death, and that the IRS would treat any gain or loss as a Capital Gain or Loss. We purchased an appraisal from J.D. Power, who is recommended for mobile home appraisals, which came to ~$38k.
My Questions: Will the IRS consider the FMV to be the price it sold for in the auction, or will they allow the appraisal price of $38k? That would give us a Capital Loss of ~$15k if I understand correctly. Related to this, since the estate will not be closed by the court until 2024, should the estate record the sale in 2023 and the K-1 show the loss in 2023, or does it get reported in 2024?
