There is no federal inheritance tax.
Sales of real estate are
usually reportable on your tax return, especially if a form 1099-S is
issued. There will most likely be no capital gain and therefore no tax.
Any capital gain would be on the difference between what the house was worth on
the date of the decedent's death (your "cost basis") and what the house
sold for. If you made any improvements, those
costs would be added to your cost basis in determining the capital gain. Add your closing cost to the cost basis. Report only your share of the sale and basis and capital gain or loss. Whether you
have a deductible capital loss is dependent on the
answers to the details.
If you lived in the house, you cannot take
a deduction for a loss on the sale of a residence, even a second home.
If the house was "investment
property", and sat vacant all this time, you can deduct the loss.
If it was rented out, you can still deduct
the loss (it's rental investment property), but you must "recapture" the depreciation allowed or
allowable. That is, you must report the depreciation taken (or that you should
have taken), over the years, as income on your tax return in the year you sold
it. It essentially reduces your capital loss, but the capital loss and
recapture are reported in different places on the tax return.
In TurboTax (TT), enter at:
- Federal Taxes tab
- Wages &
Income
Scroll down to:
-Investment Income
-Stocks, mutual funds, Bonds,
Other (Real estate is other)
Answer no, when asked if you got a 1099-B.
then follow the interview. When asked if used for business or rental, check
"other investment purpose"
