Single Family Residence in Estate

[Duane Anderson]

Taxpayer's mother died in 2009 and left her single family residence, which she lived in for years, to the estate. Estate sold home in 2010 at a large loss.....Since it is / was a single family residence I assume the character of the assets transfers to the estate....So any gain (or loss in this case) is not deductable since it is "personal" Thanks, Duane Anderson

[TaxmannEA]

The house is a capital asset in the hands of the estste. Basis equals FMV at the date of death. The estate did not live in the house. TP's mother did.

[bgiez]

What taxmanea said, and

the estate will have a loss which can pass to the beneficiaries when the final estate return is filed.

Barbara, E.A.

[Burke]

Be careful of "large losses." How large? Many people think that what the house was once worth is FMV. In this market (and 2009) FMV at DOD might be just what they sold it for. (Regardless of the local assessment on which taxes are based.) Still might be a loss for expenses, but you would have to justify anything huge, especially if it sold within 6 mos to a year.

[Bees Knees]

Difficult to claim the sale price is less than FMV

I agree with Burke. When the estate inherits the house, it's basis is FMV on the date of death. If the house is sold for less than FMV, then there is a loss. The problem is, how does one sell an inherited house at a loss? Or in other words, how does one sell an inherited house for less than FMV? If I were the IRS auditor, I would say the reduced selling price is the FMV because that is the price the estate had to sell it for in order to attract a buyer. FMV is the price an informed buyer is willing to pay knowing all facts and circumstances. In other words, if the estate had to reduce the selling price to find a buyer, that reduced selling price becomes the true FMV. Thus, there is no loss on the sale because the reduced selling price is the same as FMV (its basis).

[Burke]

That's why appraisers and some real estate agents do "comps." What similar homes in a similar location have sold for recently to help determine FMV.

[Duane Anderson]

Re FMV of inherited home

The FMV at date of death was $248,000 and it sold for $207,000 but when you add closing costs and the required repairs the loss on the sale is $65,000...Thanks, Duane Anderson

[Bees Knees]

The FMV at date of death was $248,000 and it sold for $207,000

Well that is exactly my point. If the FMV was $248,000, why did it sell for only $207,000? Was it because nobody would buy it at $248,000? If that is the case, then the FMV was actually $207,000, since that is the price it needed to be to find a buyer. Something is only worth what somebody is willing to pay for it.

[S T]

Timing Delay and Decline

Possible FMV at DOD was valid, but due to timing delay of selling property the market declined further

Do you have an actual appraisal at DOD?

Sandy

[Burke]

The FMV at date of death was $248,000 and it sold for $207,000 but when you add closing costs and the required repairs the loss on the sale is $65,000...Thanks, Duane Anderson

How long was it on the market? (Actually listed for sale....) If repairs were required to make it sell, then how did TP establish FMV at $248K?