Sale of Inherited Property

[melpaw57]

Greetings All.

My question involves Form 1099S – Proceeds From Real Estate Transactions. This involves the sale of my parent’s house that my two sisters and I inherited upon my father’s death in 2019.

I found an answer on another post here about entering only my share of the sales price and cost basis (appraised value) in TurboTax.

One other question, the home was sold last month for $170,000. According to the assessment rolls for the county in which it is located the Full Market Value (which I assume is the assessment) is currently $146,000, and the Full Market Value in 2019 was $106,000.

So since the home sold for about 16% over the current assessment, can that be taken into account when estimating the Cost Basis? In other words, use $123,000 instead of $106,000?

Obviously this is the first time I’ve ever done anything like this.

Thanks in advance for any input.

[rjs · Accepted solution]

Your basis is the fair market value on the date of your father's death, plus the cost of any improvements that you and your sisters made after his death. The assessment is not a reliable indicator of fair market value. Get a written appraisal, retroactive to the date of death, from a licensed professional appraiser.

The selling price has no effect on your basis.

[melpaw57]

Thank you. I plan to proceed as per your reply.

[melpaw57]

Just a further clarification on this if I may ask.

I have the appraisal done by the realtor that sold the home, back-dated to my father's date of death, to use as the Cost Basis.

There were no improvements done to the home since that date.

To calculate my Capital Gains, do I simply subtract that amount from the selling price of the home?

The realtor says he did not do a current appraisal on the home as the buyer paid cash.

Thank you.

[rjs · Accepted solution]

"To calculate my Capital Gains, do I simply subtract that amount from the selling price of the home?"

Yes, your capital gain is the selling price minus your basis. You also subtract selling expenses, such as a broker's fee.

In TurboTax you do not enter the capital gain amount. You enter the selling price, basis, and selling expenses. TurboTax will calculate the gain.

The capital gain from selling inherited property is always treated as long-term, no matter how long you or your parents actually owned the home. In your case it doesn't matter because you and your sisters owned the home for more than a year anyway.

"I have the appraisal done by the realtor that sold the home, back-dated to my father's date of death, to use as the Cost Basis."

A realtor is not a licensed appraiser. The value stated by the realtor is essentially an educated guess, not an appraisal.

"The realtor says he did not do a current appraisal on the home as the buyer paid cash."

I'm not sure what the realtor's point is. What the realtor might be saying is that a current appraisal wasn't needed for the sale because the buyer did not get a mortgage. If the buyer had gotten a mortgage, the lender would not have issued a mortgage without a current appraisal. But that has nothing to do with you. The current value of the home does not affect your capital gain or your tax.