Cost Basis Adjustments on sale of inherited property

[patandron65]

I inherited my grandmother's property in 1977 and sold it in 2018. I have the FMV from the probate records at the time of her death. I have a 1099S that shows the gross sale amount but not the net sale amount. What are the allowable closing costs that I can use to either adjust the cost basis upward or reduce the gross sales amount to the net sales amount and where do I report it? I have a detailed closing statement that includes the sales commissions, transfer tax information, and other costs that were deducted from the gross sales amount before I received the distribution. 

[KarenM90 · Accepted solution]

If you are selling an inherited property, you will report the gain or loss on Schedule D and Form 8949.  If the property was sold in 2018, it will need to be reported on your 2018 tax return (not 2019.)  Here is a link to TurboTax past years software:  TurboTax Prior Year Software

You will need to report the sales price at the amount exactly as it was reported on your 1099-S. 

The basis of the property will be the Fair Market Value plus Improvements, your closing costs, etc.  (If the property was rented, you will need to reduce the basis by depreciation allowed or allowable) The Closing Costs that you paid (as the seller of the property) will also increase your cost basis.  

 I am including a link to IRS Publication 551 which will provide you with more information regarding the basis of the property. Please see the bottom of Page 9 and 10 regarding Inherited Property  Basis of Property: Pub 551, Basis of Property

To enter the sale in TurboTax, with your return open: 
1.  Go to Wages and Income and scroll down to Investment Income and find Stocks, Mutual Funds. 
2.  Follow the prompts in the section (you will answer no to the 1099B question)
3.  Choose the type of investment you sold - select everything else
4.  The basic Information will be;
    1. Description –  Usually the address of the property sold
        1. Sales Proceeds – Net proceeds from the sale 
        2. Date Sold – Date you sold the property
    2. Tell us how you acquired the property - inheritance
    3. Enter the date inherited
    4. Enter your fair market value or determined basis.
    5. Continue through the interview.
 

[patandron65 · Accepted solution]

What are the specific sellers closing costs that are allowed to adjust the cost basis? Is there a form on which to report the cost basis calculation?

[JamesG1 · Accepted solution]

These seller closing costs are listed in IRS publication 551. 

• Real estate taxes (if assumed for the seller), see page 2
• If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis, see page 2
• Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions, see page 3

I am not aware of a form but a spreadsheet formatted like the example on page 6, third column should be kept in your records.