Selling Home

[ccmarkwith]

My brother and I were on my mother's condo deed. She passed,but my brother lived there until he passed in January without a will or life insurance.  I sold the place much cheaper than the market because of the horrible condition my brother left it in. Do I have to pay capital gains on it since I sold it way below what it was worth years ago. 

[DanielleCPA]

Hi @ccmarkwith 

First of all, I am so sorry for your loss of your mother and your brother.

To answer your question - if you sold the property at a loss, you would not pay capital gains tax on it (because there is no gain).  Unfortunately, you are also not allowed a deduction for the loss, because it was not a rental property.

Determining whether you actually had a gain or loss is a little more complicated - 

The basis of an inherited home is generally the Fair Market Value (FMV) of the property at the date of the individual's death.  This means that when your mother passed, you and your brother each got a "stepped-up basis" in the property.  I'm not sure how long ago that was or if you know what the FMV was at that time. 

If no appraisal was done at that time, you will need to engage the help of a real estate professional to provide the FMV for you. There is no other way to determine your basis for the property.

Then, when your brother passed (assuming you owned the condo 50/50), you also get a stepped up basis for his half to the FMV in January 2022.

If your total basis is greater than the amount you sold it for, you have a loss and will pay no taxes on the sale.  You can also reduce the gain (if any) by the selling expenses.

Additional Information

• IRS Pub 551 Inherited Property Basis
• Where do I enter the sale of a second home, an inherited home, or land?