Sale of inherited property

[Neuromancer2112]

Hi all,

My siblings and I inherited property from our father, who passed early last year. We had the property appraised at $400k for potential cost basis purposes a few months later, and put the house on the market towards the end of 2024.

It finally sold early last month at $370k. One of my siblings is the executor and should have access to the bill of sale, etc. We each received $100k up front, with a potential $14k additional, once taxes on the estate have been figured out.

I'm trying to figure out what information/forms I need to have to show the government what the cost basis was for this sale so they don't just assume it was earned income or something. Do I need a copy of the bill of sale, plus the appraisal to show that the house was sold "below cost basis"?

Any information would  be super helpful, thanks!

[AnnetteB6]

You should each have a copy of the appraisal and the closing papers from the sale to keep for your records.  You will not need to provide this information with your tax return unless the IRS requests it from you later.  

When entering the sale of the inherited property as part of your return it will go in the Investment Income section and will be reported as a capital loss.  Since the property was not your personal residence, the loss can be claimed against any capital gains you report for 2025, or the loss can be claimed over a number of years until it has been used in its entirety.  You can claim up to $3000 loss per year, assuming there are no gains to be offset.

My condolences for your loss.  

[Neuromancer2112]

Annette,

Thanks for the helpful reply. I do know about being able to claim up to $3,000 loss per year, but I can claim over $3,000 in the year it's reported? Say if I sell stock at a capital gain of $25k in 2025, I could immediately put $25k from the house to cover that?

Thanks again!

[AnnetteB6]

Yes, if you have capital gains in any year while you still have a carryover loss, the carryover loss can be applied to the gains.  The $3000 limit per year only applies if there were no gains available for the loss to offset.  Then, the $3000 loss per year can offset other types of income, such as wages.

@Neuromancer2112