3 sisters inherited the family home. The 1 sister was paid out and she didn't take the inheritance tax write off when she claimed her income years ago. This year the 2 sisters sold. Do they get to report on their taxes half each of the inherited amounts of the house (amount based on the value of the home the year of inheritance)?
Thanks
The total basis for each remaining sister when they sell the house would be 1/3 of the FMV at death plus 1/2 of what they paid to the third sister for her share.
The basis of property inherited from a decedent is generally one of the following:
When the 3 sisters inherited the property, each would be entitled to 1/3 of the basis (FMV of the house at death). They must also account for the amount they paid for the third sister for her share in the house. Each would be able to add half of what they paid to the sister to their basis in the house. (This is assuming that the 2 remaining sisters contributed equally to buying out the third sister)
sold equally by the 3 siblings to an outside party. how do I do my taxes on this when filing?
You will report your portion of the sale of the property in the investment income section of TurboTax. Treat the transaction as if its entire value is your 1/3 portion. (You report 1/3 of the proceeds, 1/3 of the market value as the basis, etc.).
For inherited property, the holding period will always be "long term," and your cost basis will be the value of the property on the date of death of the original owner (unless the estate elected an alternate valuation date, but this is not common).
Here are the steps to enter the transaction into TurboTax:
Where do I search for the value of the property : Death date: 9/13/2007?
You would need to hire a qualified appraiser. If they have been in business for a number of years they would be able to give you the fair market value as of the date of the death. They will ask you questions about the condition of the property in 2007 and will need to walk through the property.
Their fee can be added to selling expenses when you report the sale of the home.
3 siblings have inherited their fathers estate. Siblings no longer communicate. Property was sold at a loss. We have received a 1099s for our 1/3 of the sale. Trying to determine FMV fair market value. Is it kosher to use the purchase price from about 5 years prior if available? Or what else. first listing price? how does one set the FMV?
Thank you for your input.
Fair market value at date of death of the father should be determined if not by an actual appraisal at that time then by comparable properties at that time.
A Realtor should be able to provide you a reasonable FMV for your property at the time of the father's passing.
You are not able to deduct a loss on the sale of the inherited property.
why - because at death the tax basis of property is adjusted to its fair market value. so if taxpayers cost was $200 and FMV at DOD was $300 and you sell it for $350. would you rather pay tax on $150 or $50?
You can take a loss ... usually it is the selling costs that put the sale into the negative.
If you sell the home within a few months of the death then the selling price is considered the FMV as of the date of death. Then when you add in the cost of sale you can and often do have a deductible loss.
@BR1900 wrote:
If a loss, why could you not take the loss.
I agree with @Critter-3; you can take a loss on property you inherit.
However, you cannot recognize a loss for tax purposes on property you inherit if you are holding that property for personal use.
The total basis for each remaining sister when they sell the house would be 1/3 of the FMV at death plus 1/2 of what they paid to the third sister for her share.
@AlanT222 I think your train of thought may have been a bit skewed here. Happens to me at times too. The cost basis would be 1/3 of the FMV at death plus THE TOTAL AMOUNT EACH PAID to the third sister for her share. Not one half of what each paid to the 3rd sister.
What if the property was gifted ( not inherited) by someone still living? Split 3 ways for 3 siblings. Gifted and sold within 8 months. How do I evaluate fmv?
@Sunrain001 wrote:
What if the property was gifted ( not inherited) by someone still living? Split 3 ways for 3 siblings. Gifted and sold within 8 months. How do I evaluate fmv?
In this instance, you typically have a carryover basis (i.e., you take the basis of the person who gave you the property, the donor).
However, refer to the following link in the event the fair market value of the property at the time the donor made the gift is less than the donor's adjusted basis.
To figure out the basis of property received as a gift, you must know three amounts:
If the FMV of the property at the time the donor made the gift is less than the donor's adjusted basis, your adjusted basis depends on whether you have a gain or loss when you dispose of the property.
If the FMV of the property at the time the donor made the gift is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis just before the donor made the gift.
@Sunrain001