Inherited property 20 yrs ago, no cost basis but never rented it....

[AZ-Tax]

TP inherited property 20 yrs ago. Lived in property for 1st 10 years then got married and move into wife's house. Left property empty & did not rent it out. TP cannot seem to locate any cost basis of property at time of inheritance. I am beating my head against the wall if it qualify as residence cap gain exclusion but coming up empty handed. Suggestions please.

TP tells me property was under reverse mortgage prior to sale. Will that generate a 1099-S?

[Jiggers]

Have your client go to the property tax appraisal office and research the value of the property 20 years ago.

[Kram BergGold]

Capital Gain

The Taxpayer did not use the property as a primary residence in 2 out of the last 5 years so there is no exclusion of gain. The IRS says unless he can come up with the value as of 20 years ago plus any documented improvements he paid for the cost basis is zero.

[Burke]

There is probably an assessed value in the city/county tax records for the year he inherited it. Tell him to check it out.

[Y2KEA]

TP should get a forensic appraisal for FMV on DOD.

[Burke]

That might be a little tough. (1) Finding someone who would take it on; (2) finding comps for 20 yrs ago.

[taxea]

Have your client go to the property tax appraisal office and research the value of the property 20 years ago.

Have him ask for the assessment on his first tax bill, then have him contact a realtor and see whether it is possible to get comps on his property at the time he inherited it. Comps would give you a FMV. Assessment is usually a lesser value.

[Burke]

TP tells me property was under reverse mortgage prior to sale. Will that generate a 1099-S?

Not because of the reverse mortgage. Usually, a seller has to sign a form at closing stating it is his personal residence or a 1099-S is issued. I had one last year where the seller did exactly that. Unfortunately, I had to tell him it did not qualify as his personal residence for 121 treatment, since he had not lived in it for the last 10 years. He let his F-I-L live there for free. So big cap gains bill.

[taxmom34]

isn't a reverse mortgage given for a home that you live in? how did taxpayer manage that?

[Burke]

Yup. Good point! Maybe he did live in it when he applied, but I think once he moved out, it was required to be repaid within 6 mos.

[Jiggers]

Yup. Good point! Maybe he did live in it when he applied, but I think once he moved out, it was required to be repaid within 6 mos.

So if he had to pay the loan back within 6 months of moving out, he was living in it? Something doesn't make sense.