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Level 1

Sale of inherited home

I inherited a home in Texas from my father in 2001.  My step-mother lived there until 2015.  The home was sold in 2016.  How do I enter the net profit ($30000)?  Can I take off any of the closing costs and trips we took to clean it out before sale?
1 Best answer

Accepted Solutions
Level 1

Sale of inherited home

You will enter the sale of an inherited home as the sale of a capital asset. You will be able to increase the basis in the home by the amount of eligible closing costs. The trips to TX to clean the property before sale will be considered non-deductible personal expenses.

Click this link for further information about reporting the sale of a capital asset 

To enter this transaction in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, to enter this transaction in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list)
  4. Scroll down the screen until to come to the section “Investment Income”
  5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
  6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
  7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
  8. Choose type of investment you sold - select everything else
  9. Some basic information:
    1. Description –  Usually the address of the property sold
    2. Sales Proceeds – Net proceeds from the sale (on 1099-S amount received for the property) Do not include closing costs here. Instead increase the basis by any allowable closing costs. Please refer to  IRS - figuring basis on property  for information about allowable closing costs.
    3. Date Sold – Date you sold the property (on 1099-S)
  10. Tell us how you acquired the property - inheritance
  11. Enter the date inherited
  12. Enter the your fair market value - Fair Market Value of the property at the time of inheritance plus any capital improvements since inheriting it. (Also, you can increase the basis (FMV) by the allowable closing costs)
  13. If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment.

Click IRS answers on Gifts and Inheritance for more information from the IRS on the sale of an inherited house.

 

2 Replies
Level 1

Sale of inherited home

You will enter the sale of an inherited home as the sale of a capital asset. You will be able to increase the basis in the home by the amount of eligible closing costs. The trips to TX to clean the property before sale will be considered non-deductible personal expenses.

Click this link for further information about reporting the sale of a capital asset 

To enter this transaction in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, to enter this transaction in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list)
  4. Scroll down the screen until to come to the section “Investment Income”
  5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
  6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
  7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
  8. Choose type of investment you sold - select everything else
  9. Some basic information:
    1. Description –  Usually the address of the property sold
    2. Sales Proceeds – Net proceeds from the sale (on 1099-S amount received for the property) Do not include closing costs here. Instead increase the basis by any allowable closing costs. Please refer to  IRS - figuring basis on property  for information about allowable closing costs.
    3. Date Sold – Date you sold the property (on 1099-S)
  10. Tell us how you acquired the property - inheritance
  11. Enter the date inherited
  12. Enter the your fair market value - Fair Market Value of the property at the time of inheritance plus any capital improvements since inheriting it. (Also, you can increase the basis (FMV) by the allowable closing costs)
  13. If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment.

Click IRS answers on Gifts and Inheritance for more information from the IRS on the sale of an inherited house.

 

Level 4

Sale of inherited home

DS30,

 

In your reply, you stated on #13, that "If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment."  I would like to know your source and how exactly you found it.  We may be selling an inherited home for a loss, but a family member has been living there since the owner passed.  Would this disqualify the potential tax deduction if we experienced a loss on sale?