You would report this as the sale of a capital asset. If this was not the sale of your primary residence (which is not deductible) you can report the loss as a capital loss.
You will each need to report your proportion share of the gain on your individual income tax returns as the sale of a capital asset.
Click this link for further information about reporting the sale of a capital asset
- To enter this transaction in TurboTax, log into your tax return and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below)
Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:
- Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
- Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
- Next click on “I’ll choose what I work on” (jump to full list)
- Scroll down the screen until to come to the section “Investment Income”
- Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section) (see Screenshot #1)
- The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
- Since you did not receive a 1099-B, answer “no” to the 1099-B question
- Choose type of investment you sold - select everything else
- Some basic information:
- Description – Usually the address of the property sold
- Sales Proceeds – Net proceeds from the sale
- Date Sold – Date you sold the property
- Tell us how you acquired the property - inheritance
- Enter the date inherited
- Enter the your fair market value - Fair Market Value of the property at the time of inheritance plus any capital improvements since inheriting it
- If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment (see screenshot)
Click IRS answers on Gifts and Inheritance for more information from the IRS on the sale of an inherited house.
One additional note: you may also have a state filing requirement in the state where the property was located if it was not your home state. You may need to contact the state's Department of Revenue in the state where the property was located for more information. Click this link State Department of Revenue Contacts
