Inherited home

[Consultant]

Daughters' single Mother passes away and leaves her the house. She transfers to her name
and sells it about 3 months later for 140.000.00. Receives 1099-S in her name & SS-#.
DOD & sale date value are virtually the same. Should this be listed on Schedule D or 4797?
AND, can the expenses of sale from the SS be deducted thus creating an approximate $8000.00
Capital loss or a loss without the $3000.00 limit? Software will populate "Inherit" as acquisition date
when prompted.
Jack

[taxmom34]

did daughter use this house as rental property after mother died? if no, why are you considering a form 4797? if sold at a loss it can be reported on schedule D, it was inherited, right!

[Uncle Sam]

The bigger question is - did the daughter use the residence as her personal residence at any time?

[Consultant]

Inherited Home

NO! Vacant for the 3 months.
Jack

[Consultant]

Inherited Home

did daughter use this house as rental property after mother died? if no, why are you considering a form 4797? if sold at a loss it can be reported on schedule D, it was inherited, right!

Vacant for the 3 months. Put on the market within the first month. A little confused about 4797 & Sch D.
Jack

[ttbtaxes]

You would use Form 4797 only when the property was a rental property for which depreciation had been taken (or should have been taken). That was not the case here. It was an investment property and thus goes on Schedule D.

You get the step up in basis and it qualifies for long-term treatment.

[Gretel]

2nd part of your question

Yes, any expenses related to the sale will increase the basis.

[New York Enrolled Agent]

Yes, any expenses related to the sale will increase the basis.

https://www.irs.gov/pub/irs-wd/1998-012.pdf

Always a bone of contention.

[ttbtaxes]

No question the SCA is a bit of a problem but, technically, it is like a private letter ruling and can not be cited as precedent. The IRS has said this in Publication 559:

Sale of decedent's residence. If the estate is the legal owner of a decedent's residence and the personal representative sells it in the course of administration, the tax treatment of gain or loss depends on how the estate holds or uses the former residence. For example, if, as the personal representative, you intend to realize the value of the house through sale, the residence is a capital asset held for investment and gain or loss is capital gain or loss (which may be deductible). This is the case even though it was the decedent's personal residence and even if you did not rent it out. If, however, the house is not held for business or investment use (for example, if you intend to permit a beneficiary to live in the residence
rent-free and then distribute it to the beneficiary to live in), and you later decide to sell the residence without first converting it to business or investment use, any gain is capital gain, but a loss is not deductible.

Granted, an IRS publication is not authoritative either but does hold sway with IRS agents. There are a several tax cases where assets were sold by the estate and losses were allowed to be taken. Assets in involved in the various cases included a residence, a vacation home, a yacht, and jewelry. Those can be cited as precedent.

[JudyL]

Titled in daughter's name, not sold by the estate

The last two posts both discuss disallowing losses incurred on the sale of a decdent's residence when sold by the estate. The original post stated that the property was passed to the daughter as an inheritance and wasn't sold to satisfy debts of the estate, and if that is what the will states, then the sale and resulting loss are reported on the daughter's return. If it wasn't a rental in the daughter's hands, it would be considered investment property and reported on Sch D as a long-term capital loss.

Sorry for this additional info as an edit to the post but I couldn't enter the link from the device I was using. Below is a pretty good article by a CPA that discusses various situation that one encounter in dealing with a decdent's residence, and it contains some very old case law references where the IRS tried to disallow the capital loss taken by the beneficiary upon sale, and the tax court held that it was properly reported as a cap loss by the beneficiary.

http://www.fogelcpa.com/Documents/Fogel-InheritedResidCSEA.pdf

[Burke]

To answer the third part of your question, the daughter inherited the house and then sold it, so it is considered a capital loss. However, it will be subject to capital loss rules in that it is reported on Sche D, subject to a maximum deduction on her tax return of $3K (after combining gains/losses with other investment sales), and a carryover of the excess to the following years until it is used up.

[Consultant]

THANKS Again

[Consultant]

To Judy

The last two posts both discuss disallowing losses incurred on the sale of a decdent's residence when sold by the estate. The original post stated that the property was passed to the daughter as an inheritance and wasn't sold to satisfy debts of the estate, and if that is what the will states, then the sale and resulting loss are reported on the daughter's return. If it wasn't a rental in the daughter's hands, it would be considered investment property and reported on Sch D as a long-term capital loss.

Sorry for this additional info as an edit to the post but I couldn't enter the link from the device I was using. Below is a pretty good article by a CPA that discusses various situation that one encounter in dealing with a decdent's residence, and it contains some very old case law references where the IRS tried to disallow the capital loss taken by the beneficiary upon sale, and the tax court held that it was properly reported as a cap loss by the beneficiary.

http://www.fogelcpa.com/Documents/Fo...dResidCSEA.pdf

Thanks. Great Article by Fogel