Inherited property question

[effe0525]

My wife inherited property when her mother passed away 30 years ago.  The property had a trailer on it that her parents lived in.  Approximately 20 years ago a heavy snow destroyed the trailer and we paid to have it removed from the property.  What is the proper way to enter this sale?  We never lived there and she is the sole beneficiary. 

1. The FMV of the property with trailer at the time of inheritance less the sale proceeds from the land.

2. The FMV of the property with trailer at the time of inheritance less the cost to remove the trailer less the sale proceeds from the land.

3.  The FMV of the land only at the time of inheritance less the sale proceeds from the land.

4. Other?

Choices 1 and 2 will result in a loss, choice 3 would be a wash.

[Anonymous_]

The basis would be the fair market value 30 years ago (when her mother passed) for the entire property.

You can most likely add the cost of demolishing the trailer (mobile home) to the basis.

[JamesG1]

The basis of the inherited property would likely be the fair market value of the property on the date that your mother-in-law passed.  In TurboTax Online Premium, report the sale as follows:

• Click on Federal down the left side of the screen.
• Click on Wages & Income down the left side of the screen.
• Scroll down to Investments and Savings and click the down arrow to the right.
• Click Start / Revisit to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other.
• Click Add investments.
• At the screen Let's import your tax info, click Enter a different way.
• Click on Other. Click  Continue.
• At the screen Tell us more about this sale, enter the information. Click Continue.
• At the screen Now, enter one sale,
• What type of investment did you sell?, enter Land (other investment purpose).
• How did you receive this investment?, I inherited it.
• When did you receive this investment?, mother's date of death.

A case can be made that the cost of the removal of the trailer could increase the basis but the cost would be offset by any insurance proceeds that were received.  See IRS Publication 551, page 5.

IRS Publication 551, page 10, states:

The basis of property inherited from a decedent is generally one of the following.

• The fair market value (FMV) of the property at the date of the individual's death.
• The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. 
• The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. 
• The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.

@effe0525