Life Estate inherited with tenant and sold soon after.

[Landlady J]

My mother died on August 11.  My sister and I inherited a condo that was set up in a life estate.  We sold the condo two and a half months later.  What makes this more confusing for me, is that the condo was rented.  I received two months rent out of which I paid the monthly maintenance fee, electricity, and a repair.  The rent came from the county to me as Covid assistance so I have a 1099.  There were also closing costs.  How do I record this in Turbo tax?  Do I have to set up a whole Schedule E (or whatever) as a rental property or can I add the rent income and expenses simply in the same section as the inheritance and sale.  Thank you.

[ColeenD3]

Yes, you must enter the rental information, income, expenses, depreciation, etc on Schedule E. If the property was rented at all in the year of sale, you can also enter all the sales information there. Here are some of the screenshots you would encounter. You can mark it as an inheritance.

[Landlady J]

Thank you for your reply.  I am using TT Home and Business 2020.  I am having a hard time finding the screen where I say it is an inheritance.  Since it was rented for two months, I also have to put it in as a rental in Schedule E.  What step do I take first, second, etc to get this inheritance recorded, sold, and closing cost expenses logged?  I may give up.

[ColeenD3]

First enter it in the rental section. Home and Business has a different screen. You will be asked to enter the cost. When you click on the Learn More, you will see this message on the screen, among others. You will do your own calculations and enter the amount.

How to determine the cost of:

Inherited property
The cost is the fair market value of the item on the date of death of the person you inherited it from, or the alternate valuation date (the date the executor of the deceased person's estate can choose to have the property in the estate valued)

.

Gift property
The cost is the same as the adjusted basis for the person who gave you the item as a gift.

[Landlady J]

I have been trying to finish this inherited/rented condo sale for a few months now.  I only owned it for two and a half months.  There were no taxable gains.  In TT Home and Business 2020, I just can't get to a screen or pop up where I can put it is inherited.  TT keeps putting I bought the property new no matter how many times I deselect and update.

My other issue is that the closing costs came out of the sale of the property and if I enter them, TT wants to give me back about $700 more in taxes.  I had no out of pocket costs so I would feel guilty if I took this money.  I took the closing costs out of the form, at least for now.  Is deducting the closing costs in this case shady?

The rest of my taxes have been done for a while.

[AmyC]

The property was new to you this year and you sold it this year so both of those options need to be marked in the property profile information.

The date you inherited the property is the date acquired. The date sold is the date sold.

As an inherited property, the holding period is long term which is not too important since you will have lost money on the property.  Long term is best for calculating capital gains, which you don't have.

The closing costs do count as that was money you did not receive. The expenses you paid while rented count. Whenever you sell a property soon after inheriting, you will usually have a loss of the closing costs on your return.

I am very sorry for your loss.