Can realtor commissions of $19,200 and maintenance/improvement costs of $14,200 to get inherited real estate ready for sale be deducted on an estate income tax return?

[mi1p4me]

A Sept 2016 Fair Market Analysis (FMA) recommended starting list price of $315,000 to $325,000 for the house and the 19 acres of land. The house and 19 acres of land sold for $320,000 in Oct 2017. Can this FMA starting list price be used as the Fair Market Value of the inherited property?   

[DS30 · Accepted solution]

It depends -

You can decrease the gross sales proceeds by the amount of any closings costs (include the commission fees) that do not physically alter the property.

You cannot claim any expenses to get your house ready for sale unless the expenses are considered capital improvements. The cost of capital improvements are added to the basis on the house where as repair costs are considered nondeductible personal expenses by the IRS.

A "capital improvement" to your home, meaning the improvement must increase your home's value, adapt it to new uses, or extend its life. Examples of capital improvements are: adding a third bedroom, adding a garage, installing insulation, landscaping and more.

You can use the FMA recommendation as the FMV of the inherited property if the FMA report is close to (within 6 months) of the date of inheritance and if that FMA recommendation is the only information that you have related to the actual FMV of the property.