Can I deduct losses for an inherited property sold at a loss

[jamesfsmithco]

I inherited a bare lot in 1998.  I paid property taxes on it every year.  Sold it in 2020 at a loss.  Can I claim the loss between the 1998 basis and sale price plus the property taxes paid?  If so, how do I do this in Quicken Premier?

Thanks for your help!

Jim

[tagteam · Accepted solution]

Yes, you can deduct a capital loss on the sale if the selling price was less than your inherited basis.

Enter the transaction in the Investment Income section, the same as if you had sold a stock or mutual fund.

[jamesfsmithco]

Great!  Thanks for the reply.

Can I also deduct the property taxes paid over these years?

Jim

[tagteam · Accepted solution]

You should have been deducting the taxes paid each year in the tax year in which you paid the property taxes. 

If you made an election to capitalize the taxes (rather than deducting them), then you would be able to add the taxes to your basis. However, apparently you neither deducted the taxes nor elected to capitalize them and it is too late now to do either, unfortunately.

[djsult]

I inherited property in 2020 from a friend.  He left me no money or insurance. I was the sole heir and Executrix. It took me 25 months to sell it.  I paid ALL the bills for 25 months. I paid inheritance taxes.  The value of the property at his death filed on the inheritance tax return is $169,133.41. What tax Form do I use and can I claim ALL the expenses for the last two years?

[tagteam]

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@djsult wrote:

I inherited property in 2020 from a friend.  He left me no money or insurance. I was the sole heir and Executrix. It took me 25 months to sell it.  I paid ALL the bills for 25 months....

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What type of property, exactly, did you inherit? If the property were being held for business use or the production of income (e.g., rental property), then you should have been deducting expenses each tax year accordingly. Otherwise, it would be too late to deduct the expenses at this point (unless you want to file amended returns).

The sale of business property would be reported on Form 4797.

The sale of property held for personal use would be reported on Form 8949 (if you have a gain, it would be taxable while a loss would not recognized).

[djsult]

It was NOT a business.  It was private property - a home, garage and a barn. 

[tagteam]

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@djsult wrote:

It was NOT a business.  It was private property - a home, garage and a barn. 

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If the property was held for personal use, then you cannot recognize a loss on the sale but you are subject to capital gains tax if you have a gain. 

If the property was held for investment, you can recognize a loss and also are subject to capital gains tax if you have a gain.

Either way, the transaction is reported on Form 8949 and Schedule D. In TurboTax, you would enter the sale in the same manner as if you had sold a stock, bond, or mutual fund.