What IRS forms do I need for a small home I inherited in 2022 and sold in 2024?

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April 28, 2024
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My brother never married and never had children. After he died in 2022, I filed a small estate affidavit as his only heir, allowing me to avoid probate in Arizona to take possession of his property and home. I sold the house this year making it a long-term capital gain/loss. It is the only substantial asset that my brother had. The only other asset was a credit union saving account with about $1,300 in it, which I used to pay his obituary and all his outstanding bills. The house sold for $80,000 (close to breaking even) after the FMV and renovation costs are factored in. What IRS forms do I need to file for my 2024 tax return?

Best answer by Mike9241

FYI, you didn't need to wait to sell. The sale of inherited tangible property, like real estate, always gets long-term capital gain treatment even if sold the same day that you got title. Your basis would be the Fair market value on the date of his death. The sale gets reported on form 8949/schedule D. For the date acquired select inherited from the drop-down menu.

You may be able to claim a capital loss on the inherited property. Here are the conditions that need to be met:

Arm’s Length Transaction: The sale must be an arm’s length transaction, meaning it was conducted between unrelated parties.
Unrelated Buyer: You sold the house to an unrelated person.
No Personal Use: You did not use the property for personal purposes.
No Intent to Convert: You did not intend to convert the property to personal use before the sale.

Additional reporting would be required if the property was rented during the period you owned it.

Mike9241Answer

You may be able to claim a capital loss on the inherited property. Here are the conditions that need to be met:

Arm’s Length Transaction: The sale must be an arm’s length transaction, meaning it was conducted between unrelated parties.
Unrelated Buyer: You sold the house to an unrelated person.
No Personal Use: You did not use the property for personal purposes.
No Intent to Convert: You did not intend to convert the property to personal use before the sale.

Additional reporting would be required if the property was rented during the period you owned it.

USM ProfessorAuthor

Thank you very much, Mike9241.

Your response is very helpful in clarifying the matter. I appreciate your insightfulness. Keeps me "out of the weeds" sorting through the morass of IRS forms and instructions.