Because an inherited property is treated as an investment property, you are entitled to claim a loss on this. You would report 1/3 of the sales price & expenses and 1/3 of the cost basis, the amount of the appraisal.
To get started on the sale of the home
- Federal Taxes (Personal if using Home & Business)
- Wages & Income (Personal Income if using Home & Business
- I'll choose what I work on
- Scroll down to Investment Income (even though the house was inherited)
- Click Start/Update across from Stocks, Mutual Funds, Bonds, Other
- 3-4 screens in you'll see "Choose the type of investment you sold"
- Select "Everything Else"
- Enter the address, net proceeds (1/3) and date of sale (continue)
- The 'net proceeds' is after reducing your sales proceeds by 1/3 of any expenses
- At "Tell Us How You Acquired This Home", select inheritance
- Enter the date you inherited the house and on the next screen
- Enter 1/3 the appraised value
- You can add to the appraised value 1/3 of any costs to carry the property (ex. taxes) or improve/repair/clean up the property prior to sale.
- State that you used the property as an investment