Sold inherited home 23 years after father's death

Forum|Forum|2 years ago
December 6, 2023
2 replies
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I am looking to get prepared for this year's taxes. My father died 23 years ago, and I never probated the will until this year. After probation, we sold the property, and I am wondering how to file the precepts of the sale. I know that I will use the Investment Income in TurboTax and use the Stocks, Mutual Bonds, Bonds, Other option to get started. My questions are:

1.) Will I need the fair market value of the home at the time of my father's death or use the fair market value used in the probation of the will?

2.) Is my acquisition of the property when my father died or when the will was probated?

3.) If I sold the home below fair market value what are the tax consequences?

Any guidance would be appreciated.

TurboTax Home & Biz Windows

Anonymous_

Employee

@Retired in texas wrote:
1.) Will I need the fair market value of the home at the time of my father's death or use the fair market value used in the probation of the will?

You need the fair market value of the home as of the date of your father's death (as your initial basis).

@Retired in texas wrote:
2.) Is my acquisition of the property when my father died or when the will was probated?

The heirs of rear property own the property upon the death of the owner (who owned the property in severalty) subject to the debts and expenses of the estate (which the probate court ensures are satisfied).

@Retired in texas wrote:
3.) If I sold the home below fair market value what are the tax consequences?

There are generally no consequences unless the home is sold below fair market value to a related party. Usually, the sales price is the best evidence of fair market value provided the home is sold to an unrelated party and exposed to the market (general public).

Opus 17

Employee

1. Use the FMV on the date your father died. A real estate appraiser can probably give you an appraisal based on historical data.

2. The date your father died.

3. You would only have a loss if you sell for less than the FMV from 23 years ago. Is that likely to happen?

First, determine your adjusted cost basis. Your adjusted cost basis is the fair market value on the date your father died, plus any permanent improvements you have made (roof, flooring, renovation, etc.). You must also subtract any depreciation you took or could have taken for business use of the home (such as a rental, or home daycare, or home office) and you must subtract any casualty losses you deducted (like storm damage). See IRS publication 523,

https://www.irs.gov/forms-pubs/about-publication-523

If you sell for less than present market value, you still have a taxable capital gain if you sell for more than the adjusted cost basis.

If you really do sell for less than your adjusted cost basis, that is a capital loss. You can't deduct losses on personal property, but you can deduct losses on investment property. Was this personal or investment property? (For example, if you used it a second/vacation home, it is personal property.)

If you rented the home, it's investment property, but you also have to deal with 23 years of depreciation you took or should have taken.

Lastly, note that if you have been using the house as your main home for at least 2 of the past years, you can probably exclude the first $250,000 of capital gains from tax (or $500,000 if married filing jointly).