Home Inherited by Brother & Sister

[zeros]

Dad died in 2009 and the estate closed in 2011. Sister lived in the house all this time and was not rented. FMV at the time of inheritance was $160,000. Brother's basis would be 1/2 or $80,000 I would assume. Brother sold his share to his sister for $40,000. There was no gain on this transaction but would the $40,000 loss be deductible?

[Jiggers]

Dad died in 2009 and the estate closed in 2011. Sister lived in the house all this time and was not rented. FMV at the time of inheritance was $160,000. Brother's basis would be 1/2 or $80,000 I would assume. Brother sold his share to his sister for $40,000. There was no gain on this transaction but would the $40,000 loss be deductible?

No. Related parties.

[Roland Slugg]

The fact that the sale was between related partied would be relevant if the real estate was a business asset or rental property, but it wasn't. It was a personal asset, and no loss is allowed on the sale of personal assets.

[Matt Sova]

Relevant

The fact that they are related is relevant. The brother sold his half to the sister for $40,000, resulting in a loss of $40,000. If you sell a home that you inherited and did not use it for personal use, it is a long term capital loss - TTB Deluxe 6-20.

So, because it was sold to a related party the loss is not deductible.

[smithtax]

Non-Deductible Loss

Agree with Jiggers.

Unallowed related party loss pursuant to IRC §267(a) and Reg. 1.267(a)-1(a).

[John of PA]

FYI the loss dissalowance for sales to related parties does indeed apply to personal assets as well as businesses. Loss on sale of house to a non-related party is deuctible if sold by the parties individually, but if the Estate is the seller then it is not.

[New York Enrolled Agent]

Dad died in 2009 and the estate closed in 2011. Sister lived in the house all this time and was not rented. FMV at the time of inheritance was $160,000. Brother's basis would be 1/2 or $80,000 I would assume. Brother sold his share to his sister for $40,000. There was no gain on this transaction but would the $40,000 loss be deductible?

You don't say what the FMV was on the day of the sale. It is possible you have a part sale and part gift in this transaction. Given that this was the sister's residence, the brother might have made a transfer for less than what the property was worth. See Reg. §1.1015-4