Inherited Property

[RunningBehind]

Where do I enter information about a property I inherited from my brother, fixed up, and sold?  It took a few years to settle the estate so it didn't happen immediately, and I also had to spend about $50k for renovations to get it on the market.  Where does all this information go?

[rjs]

What was the property - your brother's home, or something else? Is it a single-family home, multiple units, commercial property, etc.?

What did you or the estate do with the property after your brother passed away? Was the property rented out or used for business at any time after he passed away?

[Critter-3]

https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-the-sale-of-a-second-home...

[RunningBehind]

It had been a rental property but at the time of his death it was undergoing a complete renovation, so there was no income generated.  (There was no active work going on at the time of his death.  He had paid someone to do more work but that person took the money and never completed the work.)  The estate was contested so while that was being worked out, the estate paid taxes, insurance, and utilities.  After the estate was settled and I inherited it, I paid the taxes, utilities, and insurance while getting the work complete, for which I also paid.  It took two to three years to get it finished and sold, for many reasons, chief among them the fact that I live on the west coast and the house was on the east coast.

[RunningBehind]

FYI, it was a single family residence.

[rjs]

Report the sale of the property as an investment sale for which you did not get a 1099-B, in the same place that you would report a sale of stock. In the Search box type "sold second home" (without the quotes), then click the link that says "Jump to sold second home."

When you get to entering the details of the sale, for the description enter "Inherited house." Enter the date sold, date acquired, proceeds, and basis. For the date acquired enter "Inherited."

Your basis is the fair market value on the date of your brother's death, plus what you paid for the renovations, but not what your brother paid before he died. Do not include what you paid for taxes, utilities, and insurance. You use the value on the date of your brother's death, even though title was not transferred to you until later.

For the holding period select "Long term (Box F)." A sale of inherited property is always long-term, no matter how long you or your brother actually owned it.

[RunningBehind]

Thank you.  Very helpful.

[RunningBehind]

There was a mortgage on the property that I paid while fixing the property up to sell.  Does the principal I paid add to the basis?  The remainder of the mortgage was paid off at closing, so it is deducted from the sales price to calculate "cash to seller".  Would the principal payments I made have the same effect?

Also, I did not deduct mortgage interest and property taxes paid on the property for the years prior to the sale.  Can I file an amended return to claim those costs?

[rjs]

The mortgage, mortgage payments, and payoff of the mortgage at closing do not affect the basis. Your basis is as I described in my earlier reply above.

You can deduct the mortgage interest and property tax that you paid after the estate was settled and you took title to the property. You can only deduct it in the year that you actually paid it, so you would have to file amended returns for those years. You can deduct property tax that you paid on any property you owned in the United States. But you can only deduct mortgage interest on your own primary home and one other home.

For 2018 through 2025, the total deduction for state and local taxes is limited to a maximum of $10,000 per year ($5,000 if you are married filing separately). The maximum applies to the total of real estate tax, personal property tax, and either state and local income tax or state and local sales tax.

[rjs]

I messed up a copy-and-paste, so the reply that was emailed to you was wrong. I have corrected it above (in the forum). Please return to the online TurboTax forum to see the correct reply. Sorry for any confusion.