Property damaged by Katrina, inherited and now sold
How do I determine the taxes owed on property sold that was severely damaged by Hurricane Katrina? The house was flooded by Katrina's storm surge, and my father lost his life that day. The estate has closed and my sister and I inherited the property. Prior to the storm the home FMV was approximately $85,000. Shortly after the storm, damaged property in the neighborhood was selling for $25,000 - $49,000. Rebuilt homes are now selling in the neighborhood for approx. $127,000. Insurance appraised it as a total loss and paid off the mortgage. We sold the house/property for $57,500. The interior has been gutted, mold remediation performed and pest elimination completed prior to the sale. Our sales costs included commissions paid and property taxes. The closing attorney reported on the 1099 each of us receiving $28,750. What's our basis? Do we have gains or losses?