capital gains loss with sale/donation of inherited property

[FH13]

My siblings and I inherited unimproved land in CA when our father passed away in 2020. We thought we had to property sold last year, but the that sale fell through. If we donated the property to a charity or quit-deeded it back to the Property Owner's Association, can we still claim a capital loss on the property, and if so, do we use the county property valuation when dad passed in 2020 or the valuation from the probate referee (this valuation is part of a simplified probate process in Kern County California where the land is located)?  The valuation from the probate referee is higher than the county's assessed value when dad died.

[DianeW777]

Not exactly. If you donate the property to charity it may be an itemized deduction for each of you but it will not be a loss. The proper evaluation for the value in 2020, when your father passed away would be needed and verified for your deduction. Each sibling would report their share of the donated property. Each would need a copy of the current and previous fair market value (FMV)/appraisal.

• Tax Information on Donated Property
• IRS Publication 526
• How do I enter charitable donations in TurboTax?
• What is the IRS Form 8283?

If you give it to the Property Owner's Association there would be no loss, and no deduction. However you might reach a agreement for a purchase price just to sell it and this would be considered a capital loss as long as the property was not used for personal purposes from inheritance until the sale date. 

You should discuss with an attorney or real estate agent who is an expert about such matters before you enter into a sale.