Sale of inherited property - capital loss - how to claim ?

[mdd108]

I sold overseas inherited property at a loss - property was never used as a personal property or second home.

Following the instructions given by TurboTax - see below - if I select second home - an press continue  the message is that you cannot take a loss or gain on the sale of a personal use property.  What is the solution?

1. Sign in to TurboTax and select Pick up where you left off or Review/Edit under Wages & Income
2. Select Search, enter sold second home, and select the Jump to link at the top of the search results
3. Answer Yes on the Did you have investment income in 2022? screen, then Continue
   • If you land on the Your investments and savings screen, select Add Investments
4. On the next screen, select Enter a different way
5. On the OK, let's start with one investment type screen, select Other (land, second homes, personal items), then Continue
6. On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale
7. On the next screen, select either Second Home (choose this also for inherited homes) or Land from the first dropdown menu, then enter the rest of the info for your sale, and Continue

[HelenC12]

You can't claim the loss on personal property. Losses from the sale or exchange of personal property is not deductible.

• That fact that you never personally used the home does not matter. It's a second home you owned since you inherited it. 
• Per IRS Publication 544 , Page 20, Personal-use property. Generally, property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible

You may enter the sale in TurboTax, using the instructions in your question. After you enter it, TurboTax will let you know that the loss is not deductible since it's a personal loss.

Note: The basis of the inherited property is the one of the following:

1. The fair market value (FMV) of the property on the date of the father's death. or
2. The FMV of the property on the alternate valuation date if the executor of the estate chooses to use alternate valuation. 

[mdd108]

@HelenC12 

Regarding capital gains on inherited property (and losses), you can claim a capital loss on inherited property if you sold it and all of these are true:

• You sold the house in an arm’s length transaction.
• You sold the house to an unrelated person.
• You and your siblings didn’t use the property for personal purposes.
• You and your siblings didn’t intend to convert the property to personal use before the sale.

An arm’s length transaction is a transaction where the buyers and sellers have no relationship to each other. Except when handling an inheritance, related parties include:

• The estate
• The executor
• Beneficiaries of the estate

[Anonymous_]

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@mdd108 wrote:

What is the solution?

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Enter the sale as you would for the sale of a stock, bond, or mutual fund.

Ensure that you type "inherited" for the date acquired (and long-term from the dropdown).