I inherited a house from my mother when she passed. I sold the house last year (2005), the house was apparised at 46,000 dollars when she passed. I sold the house for 37,000 dollars and paid off a mortgage loan against the house. My question is do I have to add the money I sold the house for to my income for last year and pay taxes on it. Or can I claim what I lost from the apparised value and what I sold the house for, because I didn't pocket any of the money

Thank You Thorn

Thorn:

The good news is that you do not have to add the $37,000 you received on the house sale. The basis for your mom's house was stepped up when she died to the Fair Market Value on the date she died. We can use the appraised value of $46,000 for that purpose. Since you effectively sold the house at a loss, no income was realized and no taxes are due.

The bad news is that you cannot deduct the loss on the sale of personal property. Now, had you rented the house for, say, two years, then sold it at a loss, that would be deductible. That does not appear to be the case here; sorry!