@taxesohmy2017 wrote:
We did not acquire the property until after our mom passed away. The house was in our mothers name up until she passed away. We sold it to a cash buyer.
You inherited the home with a stepped up basis equal to the FMV on the date she died. If this was close in time to the sale and there were no major changes to the real estate market, the selling price is probably a fair indication of the FMV. If there was a delay and the market changed in that time, the selling price might not be a good estimate of the FMV. You can obtain a retroactive appraisal from a professional appraiser who will use historical data to determine the appraised value on the date of your mother's death.
You may be wanting to claim a large loss since you sold it to a cash investor. I'm guessing you sold it to an investor or a flipper because it was in poor condition, or you wanted fast cash, and you may think you sold it for significantly less than its real FMV. However, FMV also takes into account the condition of the property (such as, needing substantial repairs or cleaning). The fact that you sold it for a certain price is a pretty strong indication that the FMV is at or near that price. There are some situations where you might sell below FMV (you are in a hurry to sell because you have to move for a new job, for example) but this does not sound like the case. If you try to claim a large loss, you will have to be very careful to document the condition of the property and sale, in case you are audited. Here is what the IRS says about FMV.
https://www.irs.gov/publications/p561
If the only thing you did is sell the house (or maybe fixed it up), you might be able to treat it as investment property and deduct a loss, if you had one. (If you sold the home for exact FMV, then you may still have had a small loss from the real estate commission, since you can include the commission as an adjustment to cost basis.) You would be claiming that from the date you inherited it untill the date you sold it, it was an investment because you never lived there, you just fixed it up to sell it.
Otherwise, it's a personal sale.
