You will only have income on any capital gain on the sale. If there is a capital loss and this was not the sale of a personal use property (which is not deductible), you can report the loss as a capital loss.
To
know the actual amount of the capital gain or loss on this sale, you will need
to know not only your sale's proceeds but also your basis in this
inherited property. Your basis in an inherited property is usually the
Fair Market Value (FMV) at the time of inheritance plus any capital
improvements made to the property since inheriting it (all in USD)
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 (screenshot 2)
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 even if it was not your home state. If the property sale is not in your home state, you would only need to file a nonresident state tax return in the state where the property was located to report any capital gain on the sale.
