@rjs wrote:There is no way to enter "Inherited" as the acquisition date for the sale of your main home. This seems to be a flaw in TurboTax. I will let the TurboTax people know, but I would not expect it to be fixed anytime soon. It's an unusual situation.
I wish you hadn’t said in your December 11 that I should “… enter the word ‘Inherited’ (without the quotes) instead of a date.” I wasted a lot of time trying to figure out what I was doing wrong, looking through Forms, etc.
As far as this being an “unusual situation,” I’m not so sure. Taxpayers inherit real estate all the time. Selling such real estate within a year of inheriting it may be a small portion of total real estate sales. But it is not unusual; happens all the time.
Option 1
@rjs wrote:
If you did not get a Form 1099-S for the sale, and you qualify to exclude all of the gain, or you have a loss on the sale, you do not have to report the sale on your tax return. Just omit it.
Unfortunately, my wife did get a 1099-S. (It’s hard for me to imagine a title company that would NOT issue one.) Moreover, even if she didn’t get a 1099-S, I don’t think that she qualifies for a homeowner exclusion since she has NOT lived in the house for several decades; I don’t think the house qualifies as either her primary or secondary residence. In any case, we have to report the transaction or we’ll get a matching notice from the IRS as well as Wisconsin, and eventually from Illinois as well. We can’t “just omit it.”
So option one doesn’t fit the facts.
Option 2
@rjs wrote:
If you have to report the sale, enter the date of death of the person from whom you inherited the home, as long as it's more than a year before the sale date, and more than two years before the sale date if you qualify to exclude part or all of the gain.
Yes, I did enter her mother’s date of death. She died in January 2021 and the sale closed in July 2021. (In the original post I said: “My wife inherited real estate in Wisconsin and sold it six months later.”) So, it was NOT held for a year or longer and thus, based on the holding period, the gain is a short-term gain for federal tax purposes.
But in your December 11 post, you said: “A sale of inherited property is always treated as long-term, no matter how long the decedent or the heir actually owned it.”
So option two gives me the wrong tax treatment for the facts.
Bottom-Line Question
How do I recharacterize her gain from a short-term gain based on the holding period to a long-term gain based on the property being acquired through inheritance?
