Inherited a house

[bugs6913]

My uncle died in December of 2020 and  the person who handled his estate just settled the estate in May of 2022.  I inherited his house in Florida and went down there and sold it to a house flipper for a lot less money than I could have gotten.  How do I handle this on my income tax for 2022?  The lady who handled the estate let  a family stay in it for a year for free.  I let them stay in it for one month for a months rent before I sold it.

[kdevere]

You will report the sale under investment income on your return.  When you sell your home, your gain (profit) or loss for tax purposes is determined by subtracting its basis on the date of sale from the sales price (plus sales expenses, such as real estate commissions).

You calculation for gain is:
(Selling price - closing costs) - (Price paid + closing costs + capital improvements) = Capital Gain

IN your case, your cost basis, (purchase price) is the value of the home on the date of death of the decedent, so when your uncle passed away, how much was the home worth on that date.  Then you take that value and subtract it from the selling price.  You would also enter the selling expenses/closing costs as well, which are subtracted from your selling proceeds to get a net selling proceeds.  Based on the information in your question, you may have a loss.

The software will walk you through entering the information and calculating any tax due on the capital gain, if there is one.

[Insignia]

(your cost basis, (purchase price) is the value of the home on the date of death of the decedent, so when your uncle passed away, how much was the home worth on that date.) Where do I go to learn that price of the home worth for me is it zillow?

[kdevere]

It could be Zillow, or you can go to the county accessor office, it is essentially the fair market value of the home at the time you inherited it.  Your realtor may be able to provide you a number as well.

[Insignia]

what if it was around 4 years ago when I got the property transferred by a loved one to me do I just check zillow history of what the property and property was around me sold for?

[kdevere]

Yes, Zillow is a pretty good resource for capturing FMV.  

[Insignia]

Since I sold the house this year and I got the house in 2017. Do I just look up the FMV on zillow and then who do I give it to or report for my taxes?

[kdevere · Accepted solution]

Assuming you use TurboTax, here is a link to how to enter the sale:

You will report your portion of the sale of the property in the investment income section of TurboTax.  

For inherited property, the holding period will always be "long term," and your cost basis will be the value of the property on the date of death of the original owner (unless the estate elected an alternate valuation date, but this is not common). 

Here are the steps to enter the transaction into TurboTax:

1. Click on Wages & Income.
2. Click on Show more beside Investment Income
3. Click on Start (or revisit) beside Stocks, Mutual Funds, Bonds, Other.
4. Click on Add Sales.
5. Answer No for "Did or will you receive a 1099-B...?"
6. Follow the prompts to enter the sale.  For the type of investment, select "second home" to get the most appropriate questions and categories for your sale.  

If you are using a tax preparer, you would need to provide them with documentation of the FMV, so if you are getting it from Zillow, you would need to print that and provide that to them.  You would want to print it either way, and keep it with your 2022 tax information.