My wife sold some art she inherited from her father decades ago through auction. What kind of income is this?

[JeffreyR77 · Accepted solution]

This is investment income. 

Your wife's basis in this art is the fair market value of the art at the time of her father's death. 

She will pay capital gains on the difference, less selling expenses or recognize a capital loss. 

If the art sold for less than the fair market value at the time of her father's death, she has a capital loss which can offset other capital gains or be taken up to $3000 per year in excess of capital gains until used up.