FMV Basis for the Sale of Inherited Property

[swjohnson45]

Hello All,

I, along with three other siblings, inherited a piece of property. We were each given ¼ share of the FMV. Sometime later one of the siblings died, and the three remaining siblings now had 1/3 share.

In 2023 we decided to sell the property. My feelings are that since we initially had ¼ share of the FMV, when we sold the property in 2023 we each should still use the ¼ basis for reporting the gain. The fact that there are now only three sharing the sale of the property only increases the final value of each share. It has no effect on the original  FMV we shared.

It has been suggested that we should all use 1/3 of the original FMV as the basis for the gain. Which one is correct, 1/3 or 1/4?

[M-MTax]

Each use 1/4 of the original FMV when the piece was first inherited. Then you each split the 1/3 that was inherited from the sibling and use the FMV on the date of that sibling's death as the basis for that split 1/3. 

[swjohnson45]

Thank you for your quick response. I'm a little slow in understanding how to put  it together. This what I came up with:

Gain for each of the 3 remaining siblings

2023 Gain = 2023 Sale Amount – ((2014 FMV/4) + ((2014 FMV/4)/3))

Where 2014 = Year of original inheritance

Did I get it right?

[MarilynG1 · Accepted solution]

What year did your other sibling die?  Their 1/4 would be valued at FMV on that date.

So you each have your 1/4 value as of 2014.

Take 1/4 and re-value it, and divide by 3.

Add that amount to the 1/4 you already had for the remaining siblings Cost Basis.

@swjohnson45