Last year I sold a house I inherited. After deducting the closing costs and the cost of work I had done to the house the final amount of money I received was less than it was initially appraised at during the settling of the estate.
My first question is do I claim this as a capital gains loss or do I need to pay capital gains taxes on the full amount I received?
Using the Turbo Tax website I just filled it out as if I sold a home and it does not show that I owe any taxes at this point, but I also own another home. So is the sold inherited home actually considered a secondary home therefore it does need to be claimed as capital gain/loss? Did I enter it in the wrong place? I was wondering if the section I filled out was just for the sale of a primary home, Turbo Tax does not specify. There is a place in the investments section to enter the sale of a second home, I don’t know if that is what I would want to use or not. In that section there are no tips on what to enter if you inherited the property, but in the regular home sale section there are tips for that.
If anybody can offer advice about this I would really appreciate it.
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We just had the same thing. I used Turbo Tax also. I put the sale of the inherited home under wages and income – the 5th one down called investment income. It asks for the description- I put “inherited house”. Then it asks for net proceeds. I put the selling price minus commissions. Then it asks for the date of sale-put the closing date. Then it asks for cost basis-I put the value of the house at the time of death plus all the expenses we had to get the house ready for sale. The last box is “date acquired” and I put “inherit”. That automatically makes it a long term capital investment-even if you owned it for less than one year. We had to divide every figure by 2 because we split everything with my husband’s sister. Then it ended up that we had a loss of 50,000 but you can only take 3,000 / year on losses so the 47,000 is carried over as a loss in the next years (3,000/year).
Get yourself a tax professional.
This is not your primary residence and you don’t get that exemption. You take your basis in home–FMV at time of death or time estate settled–add to it your imvestments in it–add up closing costs–settle up with your capital gain or loss.
Use the investment section. Your inherited house is a capital asset so you can take the capital loss. The regular home section is only for primary and secondary homes that you lived in.
You can’t claim a capital loss on personal use property. Since you sold it for less than it was worth when you inherited it, there is no tax consequence so it does not even have to show on the return.
Your long term profit or loss is the sales price minus selling costs (escrow & commissions) and the value as of the date of death of the person you inherited it from. You treat it as a capital asset.
You do not have to pay capital gains tax on the full amount that you received. If you are required to pay capital gains tax, you pay capital gains tax only on the DIFFERENCE between the amount that you received and your basis. However, since your basis (defined below) was more than you received, no capital gains tax is due. If it is an rental or business property, you can claim a capital loss. If it was owned only for personal use, there you are not allowed to deduct the loss.
“Your basis in property you inherit from a decedent is generally one of the following.
The FMV of the property at the date of the decedent’s death.
The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation.
The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes.
The decedent’s adjusted basis in land to the extent of the value excluded from the decedent’s taxable estate as a qualified conservation easement.
If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes.”