Not necessarily. The value of the property could increase just because of property values going up. If you did not make any improvements during that time, your cost basis would be the value when you inherited the property. So if the FMV of the farmland was $500,000 when your father passed away and you sold it for $500,000 then you would not have a taxable gain. If the FMV was $500,000 on the date of your fathers death, then you sold it for $750,000, then your capital gain would be $250,000. If you sold it for less than the $500,000 (in this example) you would not benefit from the loss, however, since you received the 1099-S, you will still need to enter it on your return.
To enter this sale you will take the following steps:
- Federal
- Income
- Show More next to Investment Income
- Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
- Select Other
- Continue through and select Other again for the type of investment
- Answer Inherited for how you obtained the property
- You will need to enter the selling price, dates and the cost basis (FMV on date of his death)
Capital Gains
Basis of Inherited Property
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