Capital loss carryforward on inherited property

[taxgirl]

I have a client who inherited a house that was sold at a loss. The previous owner of my business has it set up as short term but should be long. Can I just go into the software and "fix" this? The balance on the loss is approx. 35,000 so we have many more years at $(3000)

[ttbtaxes]

It is a long-term loss assuming the mother lived in the home and it was held for more than 12 months, including when mom as alive. That seems a rather substantial loss. How long was the period from which mom died to when the home was sold? In the past few years real estate has been appreciating, at least in most parts of the country.

[DonB]

Assuming the property was sold within one year of inheritance, I would question how there would be such a loss with a stepped up basis. If the loss is correct, I would amend any returns where the proper long term holding period produced an amended return tax due. And if it were me, I would change the current carryover to the correct amount.

[taxgirl]

According to what I'm reading, all inherited property is considered long term.

This goes back to 2010...

[Burke]

That is correct. 2010 was a unique year where Estate taxes disappeared, but so did stepped-up basis for that year only.

[taxgirl]

The house was the mother-in-laws. It burnt down and the costs to rebuild was what was used as basis. Is there any difference if the LOSS is carryforward as long term vs. short term?

[DonB]

The $3,000 maximum capital loss applies to the ST and LT combined.

[spanel]

Assuming the property was sold within one year of inheritance, I would question how there would be such a loss with a stepped up basis. If the loss is correct, I would amend any returns where the proper long term holding period produced an amended return tax due. And if it were me, I would change the current carryover to the correct amount.

I would agree... If they sold it shortly after receiving it, that was probably the FMV. There had better been several appraisals done to verify such a loss.

Chris


Also, I'm not sure there is going to be a difference short/long as far as money goes.

Chris

[Burke]

Even if sold for FMV at date of death, expenses of sale (including realtors' commissions, etc. etc) are going to produce a loss. Depending on the price of the home, it's not unusual to have a $35K loss on say, a $350K property. She did not give us any figures to review. When did it burn down? Was it insured? Was it rebuilt, and then sold? Also, don't forget to factor in the cost of the land/lot in the basis.