Do I need to Amend | Inherited Real Estate Sold within 5 months

[EMMANUEL]

I have a client that inherited her mother's principal home. I knew her mother pass away, but did not ask if the property was sold. After I filed the return, I did a search and found out they sold it within 5 months after death. I am using the sale price as my step up basis, therefore there is no gain. The question is, should I amend my client's return to report this sale, even though there is no change in liability?

[Roland Slugg]

Well, YOU can't amend your client's return without HER permission, so you should be asking if you should advise her to amend.

The technically correct answer is, yes, she should amend to report a reportable transaction. Nevertheless, if there is no change in tax, then no harm is done by not amending. However ...

You also wrote that she sold the house 5 months after her mother died, and you are "using the sale price as my step up basis." That is unlikely to be the correct basis. Your client needs to determine the property's basis as of the date her mother died, not the date the house was later sold. If it then turns out there was a gain, she should file an amended return to report it.

[JohnH]

Without all the figures, we are speculating. But if you determine that the FMV at the date of death actually was the same as the selling price, then you probably do not have a break-even transaction. The client would probably have a deductible loss. Any seller-paid closing costs, commissions, and possibly other sale-related costs can be added to the basis in calculating gain or loss.

[dmj4]

I would amend to avoid a letter. I am all about avoiding letters when possible.
Of course, you will need to discuss gain/loss and come up with some numbers.
You will also want to get the 1099-S if there was one sent.

[Jiggers]

Did your client advise you that she had sold the house? Or did you learn this from other sources, such as legal records usually posted in the local papers?

If you learned this from some other source, I don't think you should contact her about amending the return.

[taxea]

I have a client that inherited her mother's principal home. I knew her mother pass away, but did not ask if the property was sold. After I filed the return, I did a search and found out they sold it within 5 months after death. I am using the sale price as my step up basis, therefore there is no gain. The question is, should I amend my client's return to report this sale, even though there is no change in liability?

You need to have the appraisal done at Mom's date of death to determine the basis to the client. How do you know that the sale price is the same as the FMV when the client acquired the property. I once owned a property that increased in value 20k per month. I don't think using the sale price 5 months later is accurate.