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  1. #1
    kgoddard is offline Junior Member
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    Sale of parent's house after death

    I live in Virginia, however my mother, who passed away in 2007, lived in Ohio. After her passing, her house was given to my sister and me. The house was appraised at $96,000. We sold it almost immediately for (approx) $76,000. Can we write off the loss?
  2. #2
    FlyingRon is offline Senior Member
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    Quote Originally Posted by kgoddard View Post
    I live in Virginia, however my mother, who passed away in 2007, lived in Ohio. After her passing, her house was given to my sister and me. The house was appraised at $96,000. We sold it almost immediately for (approx) $76,000. Can we write off the loss?
    You can't take a deduction on "loss" (Even if there was one, but if the property sold immediately the value is likely what you sold it for NOT what the appraisal said).
  3. #3
    tranquility is offline Senior Member
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    I don't think we can be so quick to dismiss the question. The OP can take advantage of the loss--if there is one.

    That does not mean there are no additional questions involved. Obviously, the FMV is a factual issue. The OP gets a step-up in basis to the FMV as of the date of death (or at a alternate valuation date six months hence). If there was a qualified appraisal which gave the FMV at $96K that is a factor which the IRS accepts very strongly but is not required to and the burden is on the taxpayer to prove things. (Although penalties are less when the appraisal is qualified.) There is often a problem when an appraised property is sold near death at a price (higher or lower) than the appraisal. The IRS generally considers arms-length sales to be determenative of value. A good rule of thumb we have is a sale within six months of death is the amount we consider the FMV absent other facts. This market may very well be an "other fact" which allows for the loss.

    So, we get to the question, how long after the death (or altermante valuation date) was the property sold? Immediately on distribution may be long after death. Was the sale at arms length? Had the property been gifted from you to mother within a year of death?
  4. #4
    kgoddard is offline Junior Member
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    The house was sold approximately 4 months after the date of death. There wasn't any gifting involved in either direction. The house belonged to my parents for 40+ years and was given to us as a distribution of her estate / via her will.
  5. #5
    tranquility is offline Senior Member
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    You have a difficult factual scenario. See a professional for advice. There is no way to advise either way without seeing everything, including the appraisal in toto. Especially if you have other capital gains this or future years, the difference could be substantial and the tax pro would be well worth the cost.
  6. #6
    efflandt is offline Senior Member
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    I'd agree with FlyingRon. A gain would be taxed, but everything I have read says you cannot take a "loss" on personal property (except casualty or theft losses). If you receive a 1099-S for the sale, you have to show the transaction on 1040 Schedule D, with zero in column (f).

    See the 2nd paragraph of "Capital Assets Held for Personal Use" on page D-2 of schedule D instructions [url]http://www.irs.gov/pub/irs-pdf/i1040sd.pdf[/url]
  7. #7
    LdiJ is offline Senior Member
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    Quote Originally Posted by efflandt View Post
    I'd agree with FlyingRon. A gain would be taxed, but everything I have read says you cannot take a "loss" on personal property (except casualty or theft losses). If you receive a 1099-S for the sale, you have to show the transaction on 1040 Schedule D, with zero in column (f).

    See the 2nd paragraph of "Capital Assets Held for Personal Use" on page D-2 of schedule D instructions [url]http://www.irs.gov/pub/irs-pdf/i1040sd.pdf[/url]
    I am going to agree with tranq and encourage the OP to see a tax pro who is willing to research the situation.
  8. #8
    Ozark_Sophist is offline Senior Member
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    Quote Originally Posted by LdiJ View Post
    I am going to agree with tranq and encourage the OP to see a tax pro who is willing to research the situation.
    I'm going to agree with LdiJ who agrees with tranq who both disagree with Ron but with whom efflandt agrees.
  9. #9
    tranquility is offline Senior Member
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    I actually do this work as a living. This particular work of real property issues and taxation. The issue is not going to be held for personal use, but the property valuation. I promise, cross my heart, swear to god that (in an inheritance situation like this) unless the OP lived at the house with the intent of making it his residence or 2nd home, the IRS will not even bring this up as an issue at audit. Even then, I'm not sure as I've never had a client do that. (I'm just supposin' to throw the personal use people a bone.)

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