Inherited Property Sale

[cosbycd1]

My sister and I inherited our mother's house when she died last year. We got an appraisal for date of death. We just wanted to get rid of the house so we sold it for a good bit less than the appraised value. This is a Capital Loss correct? We split the proceeds evenly. If I do report it on my taxes where do I do so? I'm using TurboTax Premier 2022. I should also add that the home is located in TN and I am located in VA. Any help would be appreciated at this point.

[Mike9241]

yes it is a capital loss so it gets reported on form 8949 which is carried to schedule D.

[fanfare]

Figure the sale as if one person sold it,

then each of you puts one half of those amounts on your tax return.

an inherited house sale is always Long Term, so report on Form 8949 Page 2.

@cosbycd1 

[rjs]

Enter the sale in TurboTax as an investment sale, the same as a sale of stock, but for which you did not get a 1099-B. For the date acquired enter the word "Inherited" instead of a date. TurboTax will make the necessary entries on Form 8949 and Schedule D.

Federal Taxes
Wages & Income
I'll choose what I work on
Investment Income
Stocks, Mutual Funds, Bonds, Other

[CB156]

I also have an inherited property sale to report that as a loss. I entered the sale in investment property section. TurboTax never asked any questions regarding the sale, but automatically listed it as non-deductible. Where would this be coming from?

[rjs]

@CB156

What did you sell? You cannot deduct a loss on property that you hold for personal use. What did you select when TurboTax asked what type of investment you sold? If you selected "Second home," "Land (personal use)," or "Personal items" the loss is not deductible.

The original question here was about the sale of an inherited house. If you sold a house that you inherited, the deductibility of the loss depends on what you did with the house from the time the previous owner died until you sold it.

[CB156]

Thank you for your response. I realized I didn’t put enough information in my question which I have since done. We sold a house that belonged to my father to an unrelated buyer. I did mark as inherited in the drop-down for the date acquired. That’s why I was surprised that TurboTax automatically marked it as it did. I was using the question and answer feature so I would assumed it would’ve asked me more questions about the sale, but it never did. Could be a Mac version issue. 🤔

[PaulaM]

Revisit the section and edit your entries using the 'I'll choose what I work on' method instead of the guided steps. You'll answer that you inherited it, a description, sell date, proceeds, and FMV when you inherited it. 

[CB156]

If I list type of sale as “second home” it falls under the long-term category. That is when it shows that it is nondeductible. If I list it is “other” it comes under short term which then has a $3000 limit that is applied against ordinary income. Any thoughts on that?

[DMarkM1]

After selecting "Add an investment" select the "Stocks, mutual fund...sale" tile.  Answer, No, you did not buy the asset since it was inherited.  For the sales section use "Long term, no 1099-B received".  For the asset type select "Other".  Be sure to indicate you inherited the asset.  You can enter the dates that apply and a long-term capital loss will be added to your schedule D.  

[CB156]

Thank you for your suggestion. However, when I went the route you were suggesting, there was not an option type other. What I ended up doing and I think this will work, I selected the “Other” tile, selected the type of investment as other and “I  inherited it” then entered all the information regarding the sale. It’s still listed as a short term gain. But then  I had to go to View-open forms. I located the form 1099B worksheet and below that is the capital asset sales worksheet.  on that worksheet was able to change the Holding period from short-term to long-term. So many steps for a software that is supposed to be user-friendly.🙄

[Ken1122]

What if the house sat vacant for the 4 months between the time of the decedents death (was their primary residence) and the sell date by the beneficiary?  Can it be classified as investment property where a capital loss would be allowed or is it treated as personal use property since it was the home of the decedent?

[rjs]

@Ken1122 

Personal use means use by the seller, not by the decedents. If the house "sat vacant" from the date of death to the date of the sale, you did not use it. You can claim the loss.

[ChannelD]

Thanks for the help with this.  I read through the thread and it helped me get started.

I too inherited a house and sold it a couple months later.   It was just the time it took the transfer on death deed to be filed.  I hired a realtor and it sold pretty immediately. 

Assuming FMV to be the same as the sale, what is the best way to handle Proceeds and Cost figure on Schedule D?  Should I put the full house sales price for both?  Or should I put in the actual proceeds check amount I got after sale for both?  

There was a payoff and listing fees, but those all came out of the proceeds before I got it so I don't want to complicate things.   If it is acceptable to list it either way, then that would be helpful.

[RobertB4444]

The sale price should be entered as a full sales price and the basis as the same number.  You can then enter the costs of the sale separately in the area for that.  You'll get a credit for the costs as a capital loss.

@ChannelD