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:
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">https://ttlc.intuit.com/questions/3138189-do-i-have-to-claim-sale-of-inherited-house-as-income</a>), 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)?
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.
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!
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.
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?
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.
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!
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.
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?
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:
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?
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-software
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?
If you are using the DOWNLOADED version read that screen carefully ... it should say the upgrade is recommended but NOT required.
It does say that, but when I choose to continue with Deluxe, it assumes that the asset is reported on a 1099-B. It does not give me the option to "choose other" as the post I initially replied to shows. So, did I find a bug?
These folks are all basically right, it is usually a 50-50 deal inheriting property from a parent... unless otherwise stated in a will. For those in this type of situation. But an estate lawyer will get more specific, given the terms of the will or trust. However, for middle class heirs in California inheriting property like this, we're not talking wealthy folks here, it often turns into a bitter conflict between siblings -- those who insist on selling their inherited property shares, and those beneficiaries who want to keep their inherited home, plus keep parents low property tax base -- and avoid property tax reassessment with a Proposition 19 (formerly Prop 58) parent-to-child exclusion (from paying current tax rates). That's why I want to add this option for middle class California families...
Given that in California, thanks to Proposition 13 and Prop 19, we can transfer parents property taxes when inheriting property and inheriting property taxes – and keep parents property taxes as long as we reside in our inherited home as a primary residence, moving in within 12-months of course... So if the beneficiaries who want to keep their parent's home can buy it with a loan to an irrevocable trust, in conjunction with the Proposition 19 parent-child transfer, the parent-to-child exclusion to avoid property tax reassessment – upon buying out siblings property... Those retaining their inherited property can get a nice low property tax base, while siblings selling their property shares end up receiving a lot more money than if they sold out to an outside buyer with a broker or realtor involved, charging their 6% commission, legal fees; etc. A win-win outcome for everyone. I would suggest that anyone interested in this subject go to the CA State Board of Equalization at https://www.boe.ca.gov and get the facts; or go to a property tax blog like https://propertytaxnews.org or Wikipedia... and get info on using trust loans from an established trust lender like https://cloanc.com The more we know, the better off we’ll be dealing with a situation like this, inheriting property, buying out co-beneficiaries... saving a bundle on property taxes mainly.