Basis for house sale since spouse died and sale is within two years of death

When you enter the cost basis of the second home that was sold, you will do the manual calculations to determine the basis for sale.

The original cost, plus closing cost at purchase, the add any capital improvements to the property before the death of the co-owner.  Half of this figure is your actual cost basis.

Next, the fair market value (FMV) on the date of death, what a willing buyer would pay a willing seller when neither has a reason to buy or sell.  This is not the same as "appraised value" which is usually inflated. 

Take half of the FMV and add it to half of the cost basis above.  This is the basis you will use for the sale of the second home.

If this was a sale of your main home you may qualify for the sale of home exclusion.  In this scenario you can use the following steps to report the sale or check the exclusion rules.

To report it as a sale of your home use these steps in TurboTax Premier desktop or online

1. Select the Federal Taxes tab
2. Select Wages &Income
3. Scroll to Less Common Income
4. Select Sale of Home
5. Continue to enter your sale and carefully answer the questions about residency time.
   

To report it as an investment sale use these steps in TurboTax Premier desktop or online:

1. Select the Federal Taxes tab
2. Select Wages &Income
3. Scroll to Investment Income
4. Select Stocks, Mutual Funds, Bonds, Other
5. Select Second Home (image attached)
6. Continue to enter your sale