What IRS form is used for estate sale of property?

[MomentSeeker]

 The question above is for this problem below:

Logan [removed] is a widower whose wife, Sara, died on June 6, 2019. He lives at [removed]. He is employed as a paralegal by a local law firm. During 2021, he had the following receipts:

Details

Logan inherited securities worth $60,000 from his uncle, Daniel, who died in 2021. Logan also was the designated beneficiary of an insurance policy on Daniel’s life with a maturity value of $200,000. The lot in St. Louis was purchased on May 2, 2016, for $85,000 and held as an investment. Because the neighborhood has deteriorated, Logan decided to cut his losses and sold the lot on January 5, 2021, for $80,000. The estate sale consisted largely of items belonging to Sara and Daniel (e.g., camper, boat, furniture, and fishing and hunting equipment). Logan estimates that the property sold originally cost at least twice the $9,000 he received and has declined or stayed the same in value since Sara and Daniel died.

So do I use Schedule D or not for property sold for $9,000? If so, what is the reasoning?

[Hal_Al]

Q.  What IRS form is used for estate sale of property?

There is no form for an "estate sale".  The individual items sold will be reported on Schedule D, if they even need to be reported.

The  estate sale items (items belonging to Sara and Daniel [e.g., camper, boat, furniture, and fishing and hunting equipment]) will only be reported if there is a gain (highly unlikely).  The cost basis of inherited items is the Fair Market Value (FMV) on the date of death, which is usually what you can get for them.  So, there is seldom a gain on the sale of inherited personal property.  You are not allowed to deduct a loss on the sale of personal property. 

Q. So do I use Schedule D for the sale of the investment lot? If so, what is the reasoning?

A. Yes. The reason is: you sold a capital asset.  The $9000 proceeds is not the relevant number. The cost basis in the lot, is the FMV on the date of death, most likely the $80,000 it sold for (not the $85,000 Daniel paid for it).  So, there is little or no gain or lost. Since this is investment property, not personal property, an actual capital loss would be deductible.  You should report the sale, even if there was no gain or loss, particularly if a form 1099-S was issued. 

The statement "Logan estimates that the property sold originally cost at least twice the $9,000" conflicts with the statement "The lot in St. Louis was purchased on May 2, 2016, for $85,000." But, it's not relevant; as the cost basis is FMV, not what Daniel paid for it. 

The cost basis in the inherited securities is also the FMV on the date of death, apparently $60,000 ("Logan inherited securities worth $60,000").

[xmasbaby0]

@MomentSeeker You should not be posting personal information like names and addresses of anyone in this user forum, where it can be seen by anyone using the internet.

This is a public web site that can be seen by anyone—including scammers and would-be identity thieves who would love to contact you and pretend to be from TurboTax.  Please remove the personal information you posted here ASAP by returning to your post and clicking the three little blue dots on the upper right to edit your post.

[DoninGA]

This reads more like a homework problem.

[tagteam]

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@DoninGA wrote:

This reads more like a homework problem.

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Sure does.

https://www.google.com/search?q=Logan+B.+Taylor+is+a+widower+whose+wife%2C+Sara%2C+died+on+June+6%2C...

[MomentSeeker]

The information in my post  is fictional, made up from my textbook.

[xmasbaby0]

@MomentSeeker Thanks for the confession.  We are not here to do your homework for you.