FMV for house inherited 8 years ago?

[TaxTime3745]

I inherited a house 8 years ago from my father when he passed away but a FMV appraisal wasn't done at the time and I didn't know I needed one (amid all the chaos). I just sold it at the end of 2020 (it was a second home and left vacant but maintained) and have been trying to educate myself on doing taxes about capital gains.

When I called the IRS, the woman said using the Appraised Total Value from my property tax office was sufficient (there's 1 posted the year before he bought it and 1 posting the year after he died) but doing more research I found out that's not the case and I need the FMV instead.

Would the realtor who helped me sell the house be able to help me? She works for the same office that my father used when he bought it. I left this too late and won't have time to try and get a "retro-appraisal" that I saw mentioned on these boards a couple of times.

ATV 2011 = $66, 800

Father bought it in 2012 for $64, 700 outright (no mortgage) and died in 2013

ATV 2014 = $62, 300

I sold it in 2020 for 75K with my net being just a bit over $67K.

Other than maintaining it, no improvements were made since I inherited.

Other than asking my realtor if she could help, I'm at a loss as to how to know my house basis.

I also read somewhere that since I since I file single and my income is below $40K that I'd only have to pay capital gains on the sale but NOT federal income taxes? Or did I misread? This whole process has been information overload and I don't want to mess anything up. I've never done this before.

I know I'll need TurboTax Premier but haven't purchased yet as still trying to learn. Thanks!

EDIT = forgot to ask if I'll need to attach anything to my tax return besides TurboTax filling out all the forms/schedules for me? I did get a 1099-S for the house sale but I have no scanner and would need to use my public library or are photos via cell phone allowed?

[RayW7]

When you inherited the house your basis will be the stepped up value of the home at date of death.  

One way to value the property is to look at the county records.  Generally they will list the ""RealAVM"" of the home every year. If you can not access this information your Realtor should be able to offer some assistance.

If you can not arrive at a value then you know the FMV of the home in 2012 and you know the FMV for 2020.  Under these circumstances the IRS should be satisfied with any reasonable method to determine the FMV for the date you inherited the property.

Long-term capital gains are taxed at the rate of 0%, 15% or 20% depending on your taxable income and marital status.  

It may be you will not have any capital gain for this sale. (review your state for their capital gain rate) For single folks, you can benefit from the zero percent capital gains rate if you have an income below $40,000 in 2020. Most single people will fall into the 15% capital gains rate, which applies to incomes between $40,001 and $441,500. Single filers, with incomes more than $441,500, will get hit with a 20% long-term capital gains rate.

You will need the 1099-S and the HUD-1 closing statement in order to report the sale. 

-follow this link for additional information-

Tax Aspects of Home Ownership: Selling a Home - TurboTax ...

[TaxTime3745]

Hi, thanks for replying!

I don't have the 2012 FMV either, it wasn't in any of my fathers paperwork and I never got a FMV for 2020 either. My realtor at the time of listing suggested that $75K would be fair and sell quickly (which it did) and went over comp notes, etc. with me (including price per sq. footage, other sales in the area, etc), but an actual FMV appraisal, no. The buyer was mortgage approved so the bank appraiser OK'd but again, I have no real documents.  I just left a message with my realtor to see if she can help me when/if she calls back.

I will check my state but I do file single and am under 40K for 2020 but I had heard the 15%.

EDIT = I do have the 1099-S but why would I need the HUD-1? Assuming you mean like HUD housing which it wasn't? Just did a quick search and that ISN'T what you meant... first time I've heard of this. Could you please explain a little bit more? In all my research only the 1099-S was brought up really.

[RayW7]

The HUD 1 statement is the closing statement you received when you sold the house.  It will list the sale price,  all the closing costs and allocation of taxes associated with the sale.

The HUD-1 is a standard form used at real estate settlements.  It has a column for the buyer (the left one) and one for  the seller (on the right). 

Keep in mind some charges may be typed on one of the blank lines on the statement and the settlement agent might be using a newer or older form so the line numbers might vary but should stay in the same section.

• Abstract and Recording Fees:  Section 1200 (lines 1201-1206)
• Legal Fees, Title Search, Document Preparation:  Section 1100  (lines 1101-1111)
• Land Surveys: Section 800
• Title Insurance: Section 1100 (lines 1103 & 1104)
• Transfer or Stamp Taxes:  Section 1200 (lines 1201-1206)
• Expenses You Paid for the Seller:  Lines 409-412 on page 1.

[TaxTime3745]

Okay so the HUD-1 are all the papers I got at the title office for "closing/final signing" and the 1099-S is what they mailed me, later, via the post office - correct?

The title office when I sat down with them for closing just called them "closing documents" - so I do have those plus the 1099-S.

I'll be using TurboTax for all of this so I'll need to scan both of those packets, to attach? Do you know if TurboTax prompts you for that or? My library will love me, LOL.

Also, does the net sale amount get adjusted at all? Again sorry, total newbie at all of this but the sale price was $75K but my net in total was $67,099 - so I don't need to subtract anything from the 67,099 right or add anything to it?

[gloriah5200]

Yes, the realtor you used to sell the house should be able to help you get a fmv of the house at the time when you inherited it.  That is what you will use for your adjusted basis + certain closing costs.  Please refer to the following link for additional information:

Please refer to the following link for additional information on the treatment of selling an inherited house.

IRS Publication 559

The selling price is the selling price and is not adjusted for reporting on your income tax return.

[TaxTime3745]

Okay thanks, yeah I've seen this publication before. He passed at the end of 2013 and bought the house in spring of 2012 so his own taxes were already taken care of at the time of his death and I also took care of his 2013 taxes, in 2014 so he was all squared away which is what this publication primarily deals with in terms of estates, etc. That was all settled, thankfully.

My realtor did get back to me, but she's unsure if she can access info that far back but will check with the realtor my Dad used to buy the place in case she has anything too.

By sale price what I meant was, I've seen some screenshots of where/how to enter info and I know selling price is the 75K but the net proceeds according to my 1099-S is the 67,099 so that's what I would enter. Again the property was left vacant/empty and just maintained but I've heard a lot of talk about what kind of "closing fees/selling fees/etc" are allowed which confused me..

Because the 67,099 is everything already deducted as it's my full net proceed.. but if only certain things are allowed per the IRS...? If that makes any sense.

Also do I need to scan in every page from the 1099-S and the HUD-1, to attach to e-file TurboTax?

[AmyC]

You will enter the 1099-S proceeds of $67,099 for the sale price.

The basis can be adjusted. Once you determine the value when inherited, you can add any capital improvements made. It doesn't sound like you did anything but maintenance but there may have been something you were forced to do, connect to city water, add a fence, etc that would improve the property. For full details, see Publication 551, Basis of Assets

As for the basis, let me add neighbors. Sometimes a neighbor will know values for a time period. They may have put their house on the market or even bought around that time. The property tax office should know or a realtor that has been around.

You do not scan any of those documents in for your tax return. Those would only be needed if you are audited in a few years. Tuck them away with your tax paperwork.

[TaxTime3745]

Okay thanks!

Realtor got back to me so now I'm conflicted. The FMV at the time by Dad bought the house in spring of 2012, she says, is the sellers asking price at the time which was $74,900 but they finally sold to my Dad for $65K so I dunno if they overpriced or they just wanted to sell no matter what and took the loss? The house wasn't languishing on the market for long when my Dad bought it.

The realtor also said that since he died in fall of 2013 that the FMV wouldn't have changed that much, if at all.

So if I use the $74,900 as my basis and I sold for $75, with my net proceed being $67,099 then that would mean I took a loss....? If so, I know losses aren't deductible but still need to be reported?

I think I'm even more confused now than before! Back in 2012-13, the housing market in my area was still really low/rock bottom but in recent years it's been recovering so how could the FMV back then be the $74,900 and yet the FMV when I sold in 2020 be just $100 more at $75?

I have a document the realtor sent me at the time of my Dad's 2012 purchase.

It's also good to know that I don't have to scan/send in any attachments when I file my 2020 taxes for this since that would've been my next question as the majority of papers between the HUD-1 and the 1099-S are exactly the same so I would've wondering what exactly TO scan, if not just all of them.

Thanks for the help so far but I feel like I'm stuck now. I want to do the right thing, I don't want the IRS mad at me so any further clarification would be appreciated?

[Irene2805]

You said your father bought it in 2012 for $64,700.  That is the basis of the house.  Then you add expenses to it, like the closing costs when your father bought the property, to arrive at the adjusted basis.  If you don't have the settlement sheet from his purchase, you can "guesstimate" at 3% of the cost.  You also said there were no improvements made to the house--normally these would be added to the basis as well.

So that gives an adjusted basis of $66,700--$64,700 + 2,000 for closing costs.  You will enter the closing costs for selling the property when you enter the transaction in TurboTax.

A sale of a second home is considered a sale of an investment.  To report this in TurboTax, please follow these steps:

TurboTax Online

1. Click on Federal > Wages & Income
2. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.  If you have already entered some investment sales, you will see a screen Here's the investment sales info we have so far.  Click on the Add More Sales link. 
3. If you haven't yet entered some investment sales, you will see a screen Did you sell any investments in 20XX?  Click the Yes box.
4. On the screen,  OK, what type of investments did you sell? mark the Other box and click Continue.
5. When you get to the screen, Now we’ll walk you through entering your sale details enter the details of the sale.  You will be able to select the type of investment in the first box [second home, land, etc.]  [See Screenshot #1 below.]
6. Enter the requested information and click Continue when done.

TurboTax CD/Download

1. On the Wages & Income screen, in the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.  If you have already entered some investment sales, you will see a screen Here's the investment sales info we have so far.  Click on the Add More Sales link. 
2. If you haven't yet entered some investment sales, you will see a screen Did you sell any investments in 20XX?  Click the Yes box.
3. On the screen,  Did you get a 1099-B or brokerage statement... click the No box.
4. On the screen, Tell us about this sale, mark the radio button, I'll enter one sale at a time.
5. Enter the information in the boxes that appear.  You will have to type in Inherited Home in box 1a.  For date of acquisition, you can either enter a date or "inherited."  [Screenshot #2]
6. Enter the total sales proceeds as well as the other information requested.  
7. Continue to the screen, Select any less common adjustments that apply.  
8. Mark the first box The reported sales price did not deduct all fees or selling expenses.  [Screenshot #3]  
9. Enter the sales expenses not deducted from the sales price entered earlier.

Screenshot #1

Screenshot #2

Screenshot #3

[TaxTime3745]

Ooh thank you! I just got a couple more of my calls returned and they're saying the same thing as you. Thank you again, I really appreciate it. Never dealt with buying/selling homes before so whenever I'm unsure I like to err on the side of caution and try to ask different sources. Happy belated Easter! xx

[Branden999]

Any update? I’m going through this now. Dad passed 2017. Sold in 2022. 

[MonikaK1]

The advice posted above by @AmyC and @Irene2805 from almost 3 years ago is still applicable with regard to the steps and information needed to report the sale of an inherited home. 

You will need to determine the fair market value of the home on the date your father passed away in 2017 to use as your basis in the property; if you made any improvements to the property while you held it, you can add their cost to your basis. Report the sales price less any selling expenses where indicated.

In TurboTax, report the sale of the inherited home under Wages and Income. Scroll down the screen until you come to the section “Investment Income”

1. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ or click "Add Investment" if you have already worked on this section
2. Continue. When you see a list of brokerages for import, click Enter a Different Way
3. The next screen has a list of investment types. Click on Other / 1099-S, which includes homes that are not your primary residence

See this thread for another discussion and details on how to report the information on the sale so that TurboTax can calculate the gain. 

@Branden999 

[Branden999]

Thanks so much! Any pointers on finding the value at time of death? So far the only thing I’ve read is tax assessments for that year maybe be used. 

[AmyC]

My favorite option is to find a realtor with records of the neighborhood for that time period. A neighbor that purchased during that time is also good. You can check online to see when neighbors purchased and what they paid. The tax assessment is the one thing that is easy to find and can't be disputed. You are just looking for evidence to support your basis claim.

@Branden999