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Level 2
posted Jan 20, 2022 11:10:50 AM

Posted In Education By Mistake: Sale of Inherited House After 10 Years, Not Rented, Not Lived In

My Father-in-law passed away in 2010 and my wife and her sister and brother just sold the home in 2021.  The property was in all of their names. The money from the sale of the house was dispersed evenly amongst the four.  They owned it for almost 11 years. Never lived in it and never rented it. They just kept it up. Would this be considered a sale of a second home, inheritance or....?  I don't know how to report the income here.

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3 Replies
Expert Alumni
Jan 20, 2022 11:24:10 AM

You would report it as investment sale.

  1. Answer “no” to the 1099-B question
  2. Select Other for What type of investment did you sell?
  3. Select I inherited for How did you receive this investment? 
  4. Increase the basis (FMV) of the inherited property by the allowable closing costs.

You can deduct the selling expenses from the gross proceed.

 Sales expenses include:

  • commissions
  • appraisal fees
  • broker's fees
  • legal fees
  • advertising fees
  • home inspection reports
  • title insurance
  • transfer taxes or fees
  • geological surveys
  • loan charges (points) or other fees paid on the buyer's behalf
  • any fees for a service that helped you sell your home without a broker (listing fees, promotional fliers, etc.) 

Level 2
Jan 20, 2022 11:41:39 AM

Thank you for the response.
Question: Because they owned it for more than 5 years, but didn't live it in for at least 2 years, they have to report it? It isn't exempt from the $500,000 value rule?

Expert Alumni
Jan 20, 2022 1:47:44 PM

Yes, that is correct.  It does not qualify under the rules for a home sale.