Five grandchildren are the inheritors of the grandmother"s house in Illinois. The deceased had taken advantage of the State's deferral program to avoid the cost of property taxes on a fixed lower income. Unfortunately the State charges 6% simple interest and she lived to 106, and there is a balance due in taxes and interest in excess of $50,000. The property is certainly worth less than $100,000, and we are working to ascertain the appraised value at time of death as the property is prepared for sale.

The question here is, does the tax lien against the property become a factor in determining a loss to the inheritors? Using the numbers above, ignoring change in value and cost of the realtor etc, do each of the five grandchildren have a $10,000 capital loss?