To determine if the sale of inherited property is taxable, you must first determine the taxpayer's basis in the property.
The basis of property inherited is generally the fair market value (FMV) of the property on the date of the decedent's death, however one of these basis methods could possibly apply:
- The FMV on the alternate valuation date if the estate's personal representative has chosen to use an alternate valuation.
- The value under the special-use valuation method for real property used in farming or a closely held business.
- The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement.
- The decedent's adjusted basis in the property immediately before death if the taxpayer or spouse originally gave the property to the decedent within one year before the decedent's death and its value has appreciated.
See Publication 551 for information about unusual situations as well as the treatment of property in a community property state, property held by a surviving tenant, and a qualified joint interest.
The holding period begins on the date of the decedent's death. When inherited property that is a capital asset is disposed of, the taxpayer has a long-term gain or loss regardless of how long they held the property.
To report the sale of inherited property in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Capital Gain/Loss (Sch D) - Select New.
- Description of Property - Enter a description of the property sold.
- Form 1099-B Type - Select "Form 1099-B Not Received".
- Date Acquired - Select "Inherited - Long-Term" from the drop-down menu.
- Date Sold - Enter the date the property was sold.
- Sales Price - Enter the sales price.
- Cost - Enter the fair market value
Note: This is a guide on entering the sale of inherited property into the TaxSlayer Pro program. This is not intended as tax advice.
Instructions for Schedule D (and Form 8949) - Capital Gains and Losses