All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

Reply
Valued Pioneer
Posts: 3
Registered: ‎12-30-2016

Taxes on a sold house - inherited

When my father died 20 years ago, my sister, brother and I inherited half of the house.  My mother owned the other half.   At the time of his death, the house was valued at $120,000.

 

Fast forward to this year.  My mother died in October 2016 and we inherited the other half of the house.  At the time of her death the house was valued at $295,000.

 

I went through her records and found receipts for $20,000 in capital improvements to the house since the time of my fathers death.

 

Our cost of sale was $18,000.  We sold the house for $285,000.

 

1.  How do I figure our cost basis?  I know we receive a stepped up basis on my Mom's half.  Do we simply take the sales price divided by 2 and deduct $60,000?   $142,500-60,000=82,500/3=27,500 each?

 

2.  How can I use the capital improvements to increase the basis?  Can I apply that to just our half or can I only use half of the $20,000?

 

3.  Same question for the cost of the sale?

 

4.  Can we claim a loss on the difference between the sale price and the appraised value?  If so, can we each claim $3,000 or only $1,000 each?

 

Complicated question, but would appreciate any help.

 

John

Associate (Neighbor)
Posts: 336
Registered: ‎04-03-2013

Re: Taxes on a sold house - inherited

Hello and welcome to the community.

 

The first question to be addressed is the legal status of who owned the home.  When you say you inherited an interest in the house was this actually according to a will by your father?  This would be an unusual situation so I just want to be sure on that point.

 

The math on your situation would be pretty easy to walk through but I'm reluctant to do so without seeing paperwork so I would advise talking with someone in person who can walk along the paper trail with you.

 

On a few of the points:

-The improvements since your father's passing will not be factored in.

-The cost of the sale will be added to the adjusted basis of the home.

-You can not claim a loss for appraisal vs selling price.

 

Regards,

Caleb

Associate (Council Member)
Posts: 1,925
Registered: ‎12-13-2013

Re: Taxes on a sold house - inherited

Hello Mrprez.

I agree 100% with Caleb. But I just thought I would add that once you do determine the amount of your basis, if you do realize a loss from the sale (figured as sale price minus your adjusted basis), each of you could claim up to the $3,000 on your individual tax returns if the overall loss is large enough (ie: $9,000).

Sorry for your loss. I do hope this helps. Good luck to you.
WillMc1
Tax Professional (Retired)
Valued Pioneer
Posts: 3
Registered: ‎12-30-2016

Re: Taxes on a sold house - inherited

Thanks Caleb, the house is in Louisiana which has some odd laws with regard to inheritances.  At the time that my father died, his half of the house was given to us three kids.  The law has since changed, but at that time regardless of what your will said you could not disinherit your children.  Louisiana does not have probate they have a similar process called succession.

 

Since posting here, I did find some good information on how to proceed with regard to basis.

 

John

Highlighted
Valued Pioneer
Posts: 3
Registered: ‎12-30-2016

Re: Taxes on a sold house - inherited

Thanks, Will, we have decided that we did not suffer any losses on the sale.

 

John