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    lsalomon's Avatar
    lsalomon Posts: 1, Reputation: 1
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    #1

    Oct 19, 2014, 08:26 PM
    Using Sale Price as FMV for Inherited Property
    My sister and I inherited my mom's home in CA. Her estate is lower than the amount required for taxes, but I wanted to check about capital gains tax.
    I had an appraisal done a week after she passed 4/25/14. It was $880K. We sold it and it closed on 8/20/14. I heard somewhere that if you sell it within 180 days, you can use the sale price as the FMV. Have you heard anything about that and, if so, do you know where I can find that rule? Thanks!
    joypulv's Avatar
    joypulv Posts: 21,591, Reputation: 2941
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    #2

    Oct 20, 2014, 05:24 AM
    My understanding has always been that you have to use the formal appraisal.
    People sell inherited homes to relatives many times, at below market value, and that isn't lost on the IRS.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #3

    Oct 20, 2014, 08:20 AM
    No I don't believe you can use it for Capital Gains purposes.

    There IS an alternate valuation allowed that will allow using the sale price if it was sold within 6 months. But that is for the value of the Gross Estate, not necessarily for Capital Gains. This alternate valuation is described here:
    Alternative Valuation Method For Gross Estate | LegalMatch Law Library

    Also, if the property was transferred to the heirs rather than sold by the estate, it might also negate this rule. I would suggest consulting a tax professional to confirm.
    ma0641's Avatar
    ma0641 Posts: 15,675, Reputation: 1012
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    #4

    Oct 20, 2014, 05:26 PM
    The appraisal is your cost basis. Subtract all expenses from selling price and then you will have a profit or loss. No Capital gain, short term since this was not your residence for 2/5 years.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #5

    Oct 20, 2014, 10:24 PM
    The basis IS the $880K appraisal price.

    Add all of the costs of the sale (to include the sales commission to the realtor) to determine if there is any capital gain.

    If you DO have a gain, it is LONG TERM capital gain under current tax law.

    If you have a loss, you must report the sale, but you CANNOT claim the loss because the property is considered to be personal in nature.

    Everything is reported on Form 8949 and Schedule D on your 2014 tax return.
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