Should inherited house sale be shown as Second Home Sale?

[billtaken]

Is Inherited house sale - answer noted in your answer section, correct?  Told to select "second home sales". I indicating it was an investment, not business,  the software said 2nd homes are considered personal use property and a loss cannot be deducted and to go back and select "Everything Else" vs "Second Home Sales".

How should this data be entered or is there no loss possible with an inherited house sale?

[Opus 17 · Accepted solution]

In Turbotax, "Sale of home" and "sale of second home" only apply to personal residences.

You need to go to the Income section for "stocks, bonds and other investments" and enter the property as an "other asset."  Assuming you inherited it, never used it personally, and can show a loss (such as due to selling expenses) you can get a deductible capital loss.

[BillyBob]

I went though his but it said unless I used property as rental of for business I could not have a deduction.  Any other advice?

[billtaken]

I put the inherited house under "everything else".  As I understand it, the house would only be a second home if you lived in it otherwise it is an investment.  i initially got caught up in the same thing when I first entered it.

[kdminer]

The house I and my brother inherited in 2014 from our mom was sold 10/16.  I didn't use it for personal use, but when  I  travelled from Texas to Minnesota to work on emptying the home, I stayed at the house.  I read somewhere that if you spend time at an investment property to maintain it and ready it for sale, that does not count as personal use, and that you can deduct travel costs, utilities and vacant home insurance.  Is that true?

[billtaken]

Sorry, that is beyond my knowledge.  Perhaps someone else can answer - there is always the IRS help line.

[Opus 17]

If the only thing you do after inheriting a house is sell it, we usually see that treated as investment property, even if it was never held out for rental.  That usually allows a small loss deduction since the sales proceeds will be slightly less than the fair market value due to the real estate commission.  It's generally OK to say it's investment property in that case.  

Where you hold the property for 2 years and the only thing you are doing is readying it for sale, that would also be classified as investment property.  In this case you are more likely to have a small gain, since your cost basis is the fair market value on the date of the previous owner's death, and hopefully the property has increased at least a little bit in value.  Deducting the travel costs is, to me, a bit problematic because you are not really "actively managing" the property, you are simply cleaning it out for sale and taking extra time.  @TaxGuyBill do you have an opinion here?

[TaxGuyBill]

I agree with Opus.  The travel expenses depend on the specific facts-and-circumstances.  I am also concerned about spending time there "to maintain it".  Was the MAJORITY of your time there working on the house?  Again, it depends on the specific fact-and-circumstances, but that could be personal use.

If you can prove the expenses are reasonably necessary, they may be deductible.  If the MAJORITY of the time spent there is working on the home, in many cases that would not be personal use (unless you did not have another home at the time).

[BillyBob]

OK, but when I entered the house under "Everything Else" it the software program told me directly that I could not claim a loss.  It doesn't seem right?  I am worried I am entering it wrong in the program...  Thanks for all the previous answers and help.  If anyone know or has advice, please help!!!