Sale of inherited property -- how do i divide the loss between myself and my sibling?

[LeeM]

If you each inherited 50% of the property, then you would only record 50% of the proceeds, selling cost and basis on your return to determine any gain or loss. You can find directions in the FAQ below AND by click on "How to enter my 1099-S" blue link at the bottom of the FAQ below.

Your sibling would include the other half. So, between both of your returns, you would have all of the proceeds, selling costs and basis recorded.

The inheritance itself is not taxable. However, since you sold the property, what matters here is the fair market value (FMV) of the property on the day it was deeded to you. If you sold it for more than the FMV, meaning you made a gain, then the gain is taxable. If you sold it at a loss, then you don't even need to report the sale, as you can't deduct that loss anyway, since it's inherited property.

BASIS DETERMINATION

A home's tax basis is determined in a different way when someone inherits a home after the owner dies. When you inherit property after the owner dies you automatically receive a "stepped-up basis." This means that the home's cost for tax purposes is not what the now-deceased prior owner paid for it. Instead, its basis is its fair market value at the date of the prior owner's death. This will usually be more than the prior owner's basis.

The bottom line is that if you inherit property and later sell it, you pay capital gains tax based only on the value of the property as of the date of death.

You can enter the sale of that inherited property by entering it using the directions below (as a sale of investment) JUST REMEMBER TO ENTER ONLY YOUR SHARE OF THE AMOUNTS:

https://ttlc.intuit.com/replies/4241480

[jongoad]

In the response above, it says "If you sold it at a loss, then you don't even need to report the sale, as you can't deduct that loss anyway, since it's inherited property."

However, in another response to a related question (<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3138189-do-i-have-to-claim-sale-of-inherited-house-as-income">http...>), it says:

"If there is a capital loss and this was not the sale of a personal use property (which is not deductible), you can report the loss as a capital loss."

Can you clarify whether or not one can claim a capital loss on the sale of inherited property? Can you only NOT claim the loss if the property was used for personal use (e.g. you lived in the home and then sold it)?

[fanfare]

If you got a 1099-S document, then IRS wants to see something on your tax return.
If you tick the option for "I inherited this', TurboTax will give you the answer to your question.

[summrb]

Am I missing something or is there a contradiction in the above article? (Third paragraph) "However, since you sold the property, what matters here is the fair market value (FMV) of the property '''on the day it was deeded to you'''." vs (Fifth paragraph) "The bottom line is that if you inherit property and later sell it, you pay capital gains tax based only on the value of the property '''as of the date of death'''." Thank you for any clarification!

[vladamsoh]

Where is this in the 2020 Turbotax.  What I found told me to go to the Investment Income >Stocks, Mutual Funds, Bonds, Other.  But it never asks me about the property being inherited so my loss is now showing as a deduction.

[Tmorgan]

My father passed away in December 2019 and left his house to me and my two siblings.  After emptying the house, we listed the house with a realtor in March and sold it in April for market value.  I believe that the fair value as of my father's date of death was equivalent to the net sales price - since it was only three months or so from the date of death to the market pricing - resulting in no gain or loss .  There was no estate tax filing since the estate was relatively small.  Is it necessary for my siblings and I to report our respective portions from this sale on Form 8949?

[Critter-3]

I believe that the fair value as of my father's date of death was equivalent to the net sales price - since it was only three months or so from the date of death to the market pricing - resulting in no gain or loss .  Not the net ... the fmv is the actual sales price before expenses of sale so you will have a deductible loss. 

There was no estate tax filing since the estate was relatively small.  Is it necessary for my siblings and I to report our respective portions from this sale on Form 8949?  LOOK very closely in the closing papers for the 1099-S which reports the sale to the IRS ... whose name is on it ?   Or did they issue a 1099-S to each of you ?  And was it for the total sale price or did they divide it up between you ?    And you MUST report the sale ... failure to do so will get you an audit letter a couple of years from now.  

[vladamsoh]

I'm no expert but it depends on whether the house was sold "in the estate" where you father's name was still on the title at the time it was sold or if the property was transferred to your names and then you sold it.

If the property was sold in the estate there is no loss or gain.  The amount it sold for is the value.  When you enter it in Turbotax the market value and the net proceeds should be the same resulting in zero gain/loss.

If the property was transferred into your names before it was sold, it should have had an appraised value on the estate closing documents.  If your net proceeds (like after realtor fees, etc.) are greater than the appraised value, the profit is taxable. 

That's what little I know about it from handling my mother's estate.  I'm still waiting to hear if a net loss can be deducted.  I don't think it can but Turbotax is letting me enter it and it's showing a loss.  I don't think that's right!

[Critter-3]

Selling an inherited property  NOT used as a personal residence  can have a deductible loss.  In the TT program indicate inherited when asked how the property was acquired ... then it will automatically be long term and the loss will be deductible.  

[sdav1952]

I have a similar situation and form 1099-S indicates 50 percent gross proceeds paid to me. When I file taxes, do I list 100 percent or 50 percent of FMV at time of death as the cost basis?

[GloriaL]

No, since you owned this home with your sibling, you would be allowed to take 50% of basis as the cost of the property and your sibling would use 50% on their taxes.

To determine whether you have a gain or loss when you sold the property, you subtract its basis from the sale price. 

Note: To report investment sales, you’ll have to use TurboTax Premier, TurboTax Self-Employed, or TurboTax Home & Business.

To enter the 1099-S in TurboTax:

1. Open or continue your return.
2. In the Search box, type in "sale of inherited home" and select the Jump to link in the search results.
3. Answer Yes on the "Did you sell any stocks, mutual funds, bonds, or other investments in 2020?" screen.
4. On the "OK, what type of investments did you sell?" screen, select Other and then click on Continue.
5. On the "Tell us more about this sale" screen, enter the filer’s name listed on your 1099-S, type of inherited property and Click on Continue.
6. On the “Now We’ll walk you through entering your sale details”, under “What type of investment did you sell?” Select the type of inherited property in the dropdown.
7. Continue to enter the requested information on the screen(s).
8. On the next screen continue to answer the questions to finish entering your sale.

@sdav1952

[doulos564]

I am using TurboTax Deluxe, and when I get to #4, I am asked if I want to upgrade to Premier.  If I respond to just continue (not updgrade), then I go directly to a “Dod you get a 1099-B or a brokerage statement for these sales?” screen.

Does reporting the sale of an inherited home (Remainder Owner from the end of a Life Estate) REQUIRE the Premier version?

[Critter-3]

Yes ... to use the Sch D that you need for the sale  you will need to  EITHER   upgrade the ONLINE version   OR  you can switch to the DOWNLOADED Deluxe version (Basic if you don't need to file a state return).

To  continue in the desktop version see this…….
https://ttlc.intuit.com/questions/1901476-how-do-i-switch-from-turbotax-online-to-the-turbotax-softw...

[doulos564]

I am using the downloaded TurboTax Deluxe version installed on a PC.  This does as my reply describes.  Did you mean that I need downloaded TurboTax Premier version?