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Inheritance tax
My mother died in 1995. My father continued to live in their house and nothing was done about inheritance. In 2005 Hurricane Katrina damaged the house pretty bad. At the time of my mother's death, the house was probably worth about $150,00. After the hurricane, he sold it for $50,000. I have one sister. We each received $12,500 and he received $25,000. I received a 1099-S for the $12,500. Do I have to report that on my income tax? I figured it was a loss. I had no income for that year and my husband is receiving SSI so we didn't have to file a return.
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The FMV of house was $150,000 on the date of death of your mother. So it appears that you and your sister each inherited one-fourth of this while your father inherited half of this. Any amount or property you inherit is not taxable.
So your cost basis for 1/4 of the property is $37,500. For 1/4 property, you received $12,500. You and your sister each had a loss of $25,000. I don't think that you need to report this loss on the taxes as loss will not be deductible for the home property. |
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MukatA:
Your advice is good for the father, as it IS his home property. However, if there WAS a will by the mother and her half of the house WAS passed to the children, then the sale of the house at a loss IS a deductible capital loss for the children, because THEY did not live in the house as a home; to them, it was a business property. However, that is a LOT of IFs. If NOTHING was done about inheritance at the mother's death, I must assume she died intestate (without a will). In that case, state law dictates, but I suspect that the father would inheirit the entire estate as the surviving spouse. It also is possible that your assumption that each child inherited one-fourth of the house is accurate. The driving factor would be if the title of the house was changed to show the children as being one-fourth owners. If so, then they can CLEARLY claim the $25,000 loss on their tax return against other capital gains on Schedule D. If there are NO capital gains, then they can claim a loss up to $3,000 per year against OTHER income for as long as there is carry-forward loss left. |
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