Sale of House

[Unregistered]

Sold a house that was inherited at a loss. Can the loss be taken.I know a loss on your main home can't.

[Chief]

Sell of house

Need more particulars.

[jimmcg]

Loss on Inherited Property

Was inherited property used for income producing, investment, or personal use?

[Unregistered]

Inherited House

Property was not used at all by client.Parent died ,house was inherited then sold

[ecb34691]

Most people when they inherit a house and sell real soon have a loss. When you get the FMV at date of death and pay closing fees at settlement you have a loss on Sch D. Doesn't matter what the house was used for before you inherit.

[jainen]

not deductible

Since the house was not held as an investment, or used for business, that only leaves the personal category. The loss is not deductible.

[Armando Beaujolais]

Since the house was not held as an investment, or used for business, that only leaves the personal category. The loss is not deductible.

I disagree.

"Personal use" is the factor that prevents deducting losses on the sale of property. If the house was not used personally by the taxpayer, it's not personal use. It's investment property.

Why would an inherited house be any different from any other investment property owned by the taxpayer?

The loss deduction is allowed as long as the property was not used personally by the taxpayer.

[jainen]

increase over time

>>Why would an inherited house be any different from any other investment property<<

Because the inheritance happened on the personal level, and the property was then sold. It was never held for investment, which would mean an expectation that market value would increase over time.

[djack1040]

Inherited Property

See TTB Deluxe 21-28 for Basis of Inherited Property.

If inherited property is not occupied and used as a residence, normal capital gain/loss rules apply.

[jainen]

I agree

I agree with that. If it is not a personal residence then it doesn't get special treatment like Section 121. Use the normal rules for a capital asset. That does not mean it is investment or business-use property. There are a number of reasons why property not occupied as a residence is still personal-use, including below market rent to relatives, vacation home, or as in this case liquidating the estate. One of the normal rules for capital gain/loss is that you can't deduct a loss on personal-use property. So your citation is consistent with my point of view, and I agree.

[Unregistered]

CCH Federal Tax Guide Reports

'Where residential property has been inherited and the beneficary's only intention is to rent or sell the preoprty, there is a different tax consequence than that required by the general rules regarding loss on sale of residential property. The difference results from the fact that inherited proeprty has a neutral status, or rather, at the time of inheritance, it is held neither for personal use nor for profit purposes. It is not like property peviously occupied by the taxpayer as a residence in which case a change of intention must affirmatively be mainested before loss on the sale may be deducted.'

Inherited property does not default to personal use. A loss is allowed on the sale of inherited property if it has not been used for personal purposes by the taxpayer.