[vsj1421]

My mom died and the property was in my mom , sister and my name. I sold my half to my sister. Do I have to claim it on my income tax

[AtlantaTaxExpert]

Yes, as a capital gain. Your basis is 50% of the Fair Market Value of the house on the date of your mother's death.

If, after deducting the costs of the sale, you actually suffered a capital LOSS, you must report the sale, but NO capital gains tax would be due. Unfortunately, a capital loss is NOT deductible, because the house is considered to be personal property.

[ebaines]

AtlantaTaxExpert: it sounds like the OP was 1/3 owner before his mother died, and he gained another 1/6 ownership upon her death. Does he get to step up the portion of his original cost basis as well as the fraction he inherited?

[AtlantaTaxExpert]

ebaines:

You know, I am not sure. You are correct about being 1/3rd owner, so his basis is 33% vice 50%.

Logically, his basis should be pro-rated to one-third of what HE paid for his portion of the property PLUS one-sixth of the total FMV of the property at his mother's death, but sometimes the tax code is NOT logical.

[ebaines]

I found an example in an IRS document on figuring cost basis for jointly-owned inherited property here: Publication 551 (07/2011), Basis of Assets - see the section titled "Inherited Property." It would seem that the OP's cost basis is indeed his original cost basis for his 1/3 of the property plus the FMV of the inherited 1/6 piece - so maybe the IRS can be logical after all!

[AtlantaTaxExpert]

Praise the Lord and pass the ammunition - The IRS is following logic and common sense.

I could only hope they would do the same in other areas, like the FBAR submission.