In 2006, my wife and her brother inherited a home from her Dad.
The estate is now closed.
The home was assessed before the estate was closed.
When we sell the home, we will probably incur a "loss", i.e. sell it at less than the assessed value.
Is there any possibility for a tax deduction?
Neither my wife, nor her brother, have this house as a residence.
Also, it is not rented.

The short answer is "no" - you can't deduct the loss because it is considered a personal loss, not an investment loss. As you are apparently already aware, the cost basis of the property is its fair market value as of the date of death of your father in law. One exception - if a federal estate tax form was filed it's possible that the cost basis for the property may have been set at 6 months after death - your wife can check with the executor of the estate just to make sure about this. But assuming that the house will sell for less than its cost basis, this is really a moot point.

That's more or less what I thought already. Thanks for your help!

In 2008 my mother pass a way. My name was on the deed. Seven months after she died i sold the house. This was my mother residence. I did not live in the home at any time. I had the home appraised when she died. When i sold the house i sold it below the amount i had the house appraised for. Can i take a loss on my tax return for 2009? Can you tell me where i can find the answer in the irs pub??

Hello Oliver402. You shouldn't ask a new question on an old thread - instead please start a new one. But when you do, please clarify how it is that your name was on the deed before your mother died - this implies that you were the owner (not your mother) and hence your cost basis has nothing to do with the fair market value as of the your mother's date of death. Also - PLEASE DO NOT WRITE IN ALL CAPS - it's very distracting!