Inherited House Taxable

[bearplott]

Wife inherited 1/5 interest in her dads house. Fair market value was $121,000. House sold for $130,000. So a $9000 gain. Commission to realtor was $7800. Repairs to house prior to sale totaled $410. Attorney fees and title and closing costs and fees totaled $1737. I assume since the cost of the commission, the repairs and the all the fees totaled more than $9000, we do not have to claim capital gains?

[fanfare]

how long did you hold the home? If only  a few months, the FMV is whatever you can get for it. ie $130,000
just divide your expenses by five, and your sales price by five.
Description "20% interest in inherited home."

[bearplott]

Her siblings and her were added to the deed back in 2000, when her mom passed away, with their dad listed as having a lifetime use until his death. He passed in February. House sold in May.

[fanfare]

well that's one of the reasons to not put your name on the deed while the owner is still alive.

[bearplott]

What do you mean?

[Critter]

You must all report your portions of the sale on your individual returns to capture the deductible LOSS on your personal returns. 

[bearplott]

I'm pretty sure 2 of her sisters claimed 1/5 of the $9000 as capital gains or $1800 a piece.

[bearplott]

So the loss would be approximately $1000, correct. Split 5 ways, that's only $200 loss each. Not really worth reporting as far as I'm concerned. So if we choose not to report the loss, do we have to do anything concerning it?

[Critter]

You all MUST report the sale as the IRS gets the same 1099-S from the closing company that you got ... if you do not report it the IRS will think you had a gain of the entire sales price.  

[bearplott]

Ok. So the sale price of the property was $130,000. Fair market value was $121,000. So the total amount over the fair market value was $9000. There are a number of items, listed as debits to the seller, on the Settlement Statement I have. Can you tell me which ones I can all subtract from that $9000? Seller Credit to the buyer of $2500 to cover their closing costs. County Taxes for January 1st through the date of the sale of $1145.72. Title-Closing Fee of $150.00. Title-Owner's Policy of 592.00. Title-GAP Endorsement of $125.00. Title-Special Assessment to Fee of $25.00. Commission to Real Estate Agent of $7800. Government Transfer Fee of $390. Government Termination Fee of $30. Final Utilities Payment of $57.83. Final repairs to the house prior to sale of $410.14. Attorney Fees of $425.00 If I can deduct all of it from the $9000, we would have a net proceed of $4650.69. Divide this by 5 for a net proceed of -930.14 per person?

[bearplott]

From what I can tell, we can't deduct the taxes, so it would be a net proceeds of negative $3504.97. Divide that by 5 for a total of -700.99 a piece.

[Critter]

Everything off the closing statement is the cost of sale EXCEPT the RE tax proration ... that is a Sch A deduction for each of you to take on the Sch A IF you itemize deductions.

[bearplott]

Perfect! Now I just need to figure out how to enter it in TurboTax!

[Critter]

Follow the interview ... it will ask for the sales price, cost basis & cost of sale.  <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/4241480">https://ttlc.intuit.com/replies/4241480</a>