How do I report inherited farmland that I rented and was sold for a loss?

[danieldw5]

I inherited farm land that I rented to a farmer for 16 years.  A retrospective appraisal indicated that the property lost value over the years.  Turbotax won't let me enter this as an investment, as it deletes the information as soon as I say that it was rental property.  It won't let me enter it as rental property either, because I didn't have any income from the property during 2017.

How should I report this?  Should it be reported?  Can I claim a deduction for the decline in value?

[IsabellaG · Accepted solution]

Yes, you do have to report the sale of your inherited property.  Your gain or loss on the sale will be calculated by subtracting your cost basis in the property from the sales proceeds.

1. Report your sale under Less Common Business Situations, under Sale of Business Property.
2. On the Screen Any Other Property Sales, check Sales of Business or Rental Property that you haven't already reported.
3. On Sales of Business or Rental Property click No, because you didn't sell at a profit.
4. On Sale of Other Business Property say Yes.
5. Continue to enter your description, cost basis, and sales information.

I entered a sale for an inherited farm, with an inherited value of $50,000 and a sales price of $30,000.

[Edit 04/04/2018 12:33 PM]

[danieldw5]

This isn't working for me.  When I follow your instructions, Turbotax asks me the question "did you use this land for business or investment?"  I am presented with 3 options.  'I used it as a rental" "i used it as an investment" and "I used it for personal, non-investment purposes."  When I clicked that I used it as a rental, Turbotax stated that I shouldn't "enter sales of business property in this interview topic" and that it should be reported in the income topic for my business or rental.  Then, it deletes everything I just entered.  

So then, I went over to the business income page and it tells me to delete that as well, because there was no income for 2017.

[IsabellaG]

@danieldw5 See my revised answer, with screenshots. Please let me know if this works for you. Under the circumstances you describe, you would be able to claim a loss.

[IsabellaG]

This is under the Business Tab.

[danieldw5]

The revised instructions aren't working either.  When I enter the sale under Less Common Business Situations, TurboTax says "your sale of farm land did not result in a gain.  Report here only sales of property that you made a profit on.  We'll remove this sale now."  I can't seem to be able to enter it anywhere.

[IsabellaG]

@danieldw5  I have run this scenario through TurboTax Home & Business several times, and I do get the results as shown in the screenshots above ( I am adding more). Please let me know if you are NOT using  the Home & Business Desktop version.  I advise you to check the forms in your return to see if these losses are showing up on your 1040 even if the interview questions are telling you that the sale is being deleted.  Go to Forms Mode by clicking the Forms icon in the upper right hand corner of your screen, then review your 1040 . Look at  line 14. Also check if a Form 4797 is in your forms. Please let me know what you see.

[danieldw5]

I finally figured it out. I wasn't receiving those first few interview questions because I was going to the specific section. I went back and clicked "visit all" and I finally received those first few questions and I was able to enter the loss. However, I'm on the fence about whether or not inherited land can be claimed as a business loss.

[IsabellaG]

Yes, if you used it as a rental for the time that you owned it. It was business property, and you can claim a loss. The issue I could see is that you need to be very sure that your appraisal for the value of the property as of the date of death is accurate, and can be supported if the IRS ever examines this sale.

[danieldw5]

Thank you so much for your time and attention to detail!

[IsabellaG]

You are so welcome!

[bethpaul1]

This still doesn't work even if I select Visit all for the Less Common Business Situations