I inherited 12.5% of a home. Do I only show 12.5% of the Sale Price, Expenses, and FMV when entering the information into TurboTax or the 100%?

[KrisD · Accepted solution]

Yes, 12.5 %. If the home was sold, you will need to calculate ONLY YOUR SHARE of the basis and gain/loss if any on the sale. 

[Hal_Al]

Unless the 1099-S was only in your name and showed the full price. Then you'll have to use a work around, to avoid a possible IRS inquiry.

[ctrifiro]

What type "work around" - what do you mean?  The 1099-S shows the full sale price of $285k.  The FMV was $278k.  Net sale price after expenses was $245k (it was a $33k loss after expenses).

[KrisD]

Hal-Al may have a better idea, not sure I understand your numbers, do you mean you spent 40,000 on improvements? If so, and there was a 33,000 loss total, enter the FMV at date of death as 289,125 in order to claim the 4,125 loss which is your share.

[ctrifiro]

Yes - here are the details:  Sale Price: $285k  |  Inherited Value: $278k 18 months after inherited |  $44k (the 33k above was a typo) in Repairs needed to sell it.  The Sale Price less the Repairs paid = $241k.  The house was empty until sold. My goal  is to claim a loss on 1/8 (12.5%) difference between the Inherited Value ($278) and the adjusted Sale Price $241k.

[Hal_Al]

Your cost basis is $278K + 44K = $322K. So your loss is 1/8 of $37 (322-285).

But, you've add another wrinkle: "Inherited Value: $278k 18 months after inherited".  You can't use a value 18 months later. The cost basis is the value on the date of death or Where the decedent's executor makes the alternate valuation election, then basis will be determined as of the date six months after the date of death (or, if the property is distributed or otherwise disposed of by the estate within the six month period, the date of distribution or other disposition). Reference: <a rel="nofollow" target="_blank" href="http://www.rhowellsconsulting.com/inherited_property.htm">http://www.rhowellsconsulting.com/inherite...>

[ctrifiro]

Sorry - I'm not being clear. The FMV of the house at the date of death (3/19/15) is $278k.  The house was sold in 9/15/17 for $285k.  $44k was spent in repairs on the house in order to sell it.   How would I need to enter this into TurboTax to show a loss?  BTW,  only inherited 1/8th (12.5%) of the house.  Thanks.

[Hal_Al]

Your cost basis is $278K + 44K = $322K. So your loss is 1/8 of $37K (322-285). In general the work around goes like this: report the entire 1099-S amount ($285K) as your sale amount. Adjust your cost basis to get the net result you want.  In your case, if you want to claim a loss, the result is -$4625  (loss of 1/8 of $37K) . So, enter $289,625 as your cost basis.

Type> 1099-S, sale of property other than main home <in the find (search) box.
-Click Jump to.
-Say no when asked if you got a 1099-B.
      Then follow the rest of the interview.
-For type of investment click everything else
-For property description put the house address
-For net proceeds enter $285,000 (the 1099-S amount)
For how your acquired the property select inherited
-For fair market value enter $289,625 (remember, you’re using a work around)
-On the next screen select used the property as an investment
That should give you a long term capital loss of $4625  (1/8 of $37K)

You are doing it this way because you got the1099-S for the full amount. The other 7 heirs (assuming they didn’t get a 1099-S) will do it differently. They will use $35,625 (285K / 😎 as their sale amount and $40,250 (322K / 😎 as their cost basis/fair market value). That will result in the same $4625 loss you have.

Note: if you sold to a related party (e.g. one of the heirs bought out the other 7; the loss will not be allowed.

[ctrifiro]

Thanks. One other question:  The other 7 people who shared in the inheritance all got 1099-S for $285k.  Would that change the way I should present the inheritance on my taxes?

[Hal_Al]

 How was the property used between inheriting it and selling it. A loss on the sale of personal use property is not deductible. So, one work around is just don't report it at all. It's easily explained, if you get an IRS inquiry.  

If the property sat vacant (no personal use by you or any other family member or friend), then the property is considered investment property and the capital loss is deductible.

In general the work around goes like this: report the entire 1099-S amount ($285K) as your sale amount. Adjust your cost basis it get the net result you want. 

In your case, if you want to claim a loss, the result is -$4625  (loss of 1/8 of $37K) . So, enter $289,625 as your cost basis.

 If there was personal use enter $285K as you cost basis to show 0 as your gain or loss.