My brother and I inherited our mom's house in July 2007. We sold it in Sept 2008. We both received a 1099S for $31,000. The house had FMV of $83,700 and we sold it for $62,000.00. Is this a loss? On Schedule D, line 8, do I put 1/2 the sales price in 'D', since it is divided equally between us? What do I put on 'E'? Can we claim the realtor costs, and closing costs, etc? The instructions say to write INHERITED in the place where it says date inherited. Thank you so much for any help. Frank :)

Frank:

It appears that you are in a bit over your head.

For this reason, I suggest you get professional tax help to be sure that this IS reported correctly.

To answer your question, yes, you CAN report the loss if you NEVER lived in the property since your mother's death.

The house was empty, it was for sale for quite awhile. We had to clean it out and paint, etc.

You never lived in it, so it should be considered an investment property. That being the case, you CAN claim the loss.

Yes, you can add the realtor, fix-up and cleaning costs to the basis to claim those costs.

If you have no long-term or short-term capital gains to offset the loss, the most you can claim for 2008 is $3,000.

The remaining loss is carried forward to future years to offset gains or $3,000 per year of income until you use it up.

How can it be investment property, it sat there empty for sale, for a year.

To be a private residence (and thus ineligible for loss claim on the sale), one must LIVE in it or show INTENT to live in it.

It is clear that neither brother showed such intent, so. By default, it would be considered an investment property.

Thanks so much for your help.