DS30,

In your reply, you stated on #13, that "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."  I would like to know your source and how exactly you found it.  We may be selling an inherited home for a loss, but a family member has been living there since the owner passed.  Would this disqualify the potential tax deduction if we experienced a loss on sale?

For 2020, the screens have changed and this answer won't quite apply.  One thing different for 2020 is you should type "Inherited" in the field for the acquisition date.

@JeanneK  If you have a loss on inherited property, it is claimed, up to $3,000/year. What do you mean the loss is zeroed out? My program is calculating correctly. Do you need to update?

Amy,

I got this from Turbotax 2019.  This is a case where the inherited house was sold as soon as it came out of probate.  It was never used as an investment or lived in by the heir.  When entered in Turbotax 2019, it asks how the property was used.  When "personal, non-investment use" is selected, Turbotax says you cannot take a loss on property that was never used for investment purposes and it zeroes out the loss.

If I misinterpreted, that would be a bonus, as I could then use the loss to offset all gains +3000, right?

You did not misinterpret - you cannot take a loss on property that was never used for investment purposes.

From the IRS:   A loss on the sale or exchange of personal use property, including a capital loss on the sale of your home used by you as your personal residence at the time of sale, or loss attributable to the part of your home used for personal purposes, isn't deductible. Only losses associated with property (or a portion of property), used in a trade or business and investment property (for example, stocks) are deductible.

Losses (Homes, Stocks, Other Property)

ToddL99,

     What if the home was never used as a personal residence?  It just sat empty from the date of death until sold?  

Unless it was actively used as a rental property (or for some other business purpose), its identity is based on the last person who occupied it.

If that person was an owner-occupant, a surviving spouse- occupant or even someone who was permitted to occupy the property at no cost, then it is considered as personal-use property

Personal-use property is not purchased (or retained) with the primary intent of making a profit, nor do you use it for business or rental purposes. It includes things like your home, furniture, appliances, personal vehicle, and clothing.

Thank you so much ToddL99!  I have modified my original comment.  I will say that the Turbotax screens from 2019 were much more user-friendly than the 2020 version.

My 3 siblings and I inherited a house through a trust in 2016.  One sibling remained in the house for about 3 years.  9 months later (during which it was uninhabited), we sold the house (in 2020).    We can claim a loss based on the fair market value in 2016.  I was going to report the loss for my share of the house sale but since the house was occupied, the majority of time since the inheritance, I am assuming I cannot take this loss.  How do I report the sale in Turbotax?

@JN21

Generally, property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible. You can deduct a loss relating to personal-use property only if it results from a casualty or theft.

To enter that sale of an inherited second home in TurboTax Online: see Where do I enter the sale of a second home, an inherited home, or land on my 2020 taxes?

To enter sale of a second home if you're using the CD\Download version, click on TurboTax CD/Download.

If your sibling was renting the property and you had set the house up as a rental on your tax return, see I sold my rental property. How do I report that?  A loss on the sale of rental property, would be deductible.

Related Information:

• Where do I enter Form 1099-S?
• Is the money I made from a home sale taxable?
• I sold my rental property. How do I report that?
• Where is Form 8949?

Thanks so much.  I think I saw a link to states about guidelines in reporting such sales to them (this sale was in a different state from my state of residence).  Do you have a link for that?

There is not a separate entry on the state return.  However, if the sale was in a different state than your resident state and generates a taxable gain, you may need to file a tax return in that state by filing a nonresident return.   If it is a non-deductible loss, you won't need to file the nonresident state return.     @JN21

Why would I have to file a nonresident state return?

How do I file a nonresident state return?

I agree completely.  The 2020 version of both Deluxe and Premier default to MAIN HOME ONLY.

No other options are offered.

I need a CPA