Inherited home sold two months after death

[GTS1101]

I have a client who inherited a home in Oct 2008 with her two brothers and they turned around and sold it in Dec 2008 at a loss. Most of the inherited homes I have dealt with in the past have all been at gains so it was reported and the client paid the tax. I don't remember in my 15 years of practice dealing with an inherited home sold at a loss. From what I could see in the IRS rules this would be a non-deductible loss. My client is saying that one of her brothers is writing off the loss and he is going to claim it was investment property therefore he can deduct the loss on the sale. The home was never rented out. It sat for the two months until it was sold. Am I wrong in my research and can they deduct the loss because technically it is investment property once they inherit it or is it a non-deductible personal loss? Thanks for your advice and suggestions.

GTS1101

[Gretel]

If none of them lived in the home, I think it was investment property to them. Even if the value didn't drop in 2 months, just the closing cost would produce a loss.

[bgiez]

Gretel is correct

the loss can be shown on Schedule D with "inherited" as acquisition date, and the term as long. Reduce the sales price by the expenses of sale.

[Gene V]

FROM J.K. LASSER’S

Inherited Residence

If you inherit a residence in which you do not intend to live, it may be advisable to put
It up for rent to allow for an ordinary loss deduction on a later sale. If you merely try to sell, and you finally do so at a loss, you are limited to a capital loss.

There are a couple of court cases they refer to allowing the loss.