Loss on the Sale of an Inherited Home

A beneficiary who inherits the residence of a decedent generally acquires it with a basis equal to the fair market value at the decedent’s date of death, and since it is inherited property, it is treated as held for long-term. Generally, a beneficiary will sell the residence through a broker and will have substantial sales costs. A frequent question is whether or not a loss is allowed on the sale. The answer to that question depends upon the beneficiary’s use of the property after inheriting it.

Loss on the sale of inherited property, which was the residence of the decedent, can be deductible if the beneficiary immediately attempts to rent or sell the property. (Campbell, N. Stuart, (1945) 5 TC 272; Carnrick, George, (1947) 9 TC 756, acq.)

If the beneficiary was living in the house at the decedent's death, a loss will be allowed if the beneficiary indicates his intention to move and does so as soon as he can locate other quarters. A reasonable time is allowed to do this. (Crawford, Mary, (1951) 16 TC 678, acq.)

If the beneficiary uses the property personally after inheriting it, then it becomes personal use property and a loss will not be allowed.

August 31, 2016 by Lee Reams Sr.
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