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Sale of inherited property at a loss
I sold my share of an undeveloped inheritance property in NY in 2011, left to me in 2008. Property appraised at time of death at 750K, my 1/6 share 125K. Property sold for 550K in 2011, my share 91,666. Have been out of work here in NJ for almost two years, so this was my only income. I have deductions for medical bills, job search, mortgage interest etc. I don't know how much I have to claim deduction -wise to minimize my tax exposure on this sale. Is this taxable income, and if so, what is my exposure given the loss on the sale? I used to have an accountant do this, but can't afford one right now. Thank you for your help.
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Let me get this straight. You inherited property. The appropriate inheritance and estate taxes were paid back in 2008 at the time of the transfer, right? So taxes were paid on the full appraised value of the property when it passed to you. Now you've sold it at a loss, which is a loss, not a gain.
By my calculations, there should not be any tax liability, and you may be able to write off the loss against whatever investment gains you might have. Do I have the facts straight, or is there something I'm missing? |
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You sold property at a loss so you do not have any income from this sale so you do not pay any tax.
If this is residential property, you can not claim the loss. If this is business property, you must report loss on schedule D (Form 1040). Your cost basis is the value of property (your share) on the date of inheritance. Your U.S. Tax Return: Tax on Inheritances |
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Originally Posted by MukatA
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If your brother handled the estate, and you haven't been sought out by the IRS or the decedent's home state for taxes left unpaid, chances are all the inheritance and estate taxes were paid at the time the estate was settled. In my state, the estate can't be distributed without proof that all taxes have been paid including waivers issued by the state for the inheritance tax payments, so there shouldn't be any issues at all. Since it was an empty residential lot and not a commercial enterprise, just do as the others have said and report it on Schedule D. You're good to go. :)
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