decrease in value on inherited property

Posted by John on February 6, 2009, 3:40 pm

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these circumstances -

Mother passed away in Nov. 2006 Her house was left to three
surviving adult children. One child lived in the house until it was
sold in 2008 for $200,000. No appraisal done at death but in June,
2007 an appraisal was done and the value was $300,000. Can the
$100,000 difference between sale amount and appraisal be deducted as a
capital loss ?

One answer from a tax professional was yes, it is deductible on Sch. D
for the two surviving children that did not live in the house (limit
$3000 yr)

this question was on another tax forum and it's not my exact personal
situation but I am interested in other opinions if this is a
deductible "loss"

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Posted by ed on February 6, 2009, 4:47 pm

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> these circumstances -

> Mother passed away in Nov. 2006 Her house was left to three

> surviving adult children. One child lived in the house until it was

> sold in 2008 for $200,000. No appraisal done at death but in June,

> 2007 an appraisal was done and the value was $300,000. Can the

> $100,000 difference between sale amount and appraisal be deducted as a

> capital loss ?

> One answer from a tax professional was yes, it is deductible on Sch. D

> for the two surviving children that did not live in the house (limit

> $3000 yr)

> this question was on another tax forum and it's not my exact personal

> situation but I am interested in other opinions if this is a

> deductible "loss"

I'm not a tax professor, but I think a 1/3 interest in a personl
residence cannot produce a tax deductible loss. I would also be
suspect of a Jly 2007 apreisal

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Posted by Dick Adams on February 6, 2009, 5:24 pm

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>> Mother passed away in Nov. 2006. Her house was left to three

>> surviving adult children. One child lived in the house until it was

>> sold in 2008 for $200,000. No appraisal done at death but in June,

>> 2007 an appraisal was done and the value was $300,000. Can the

>> $100,000 difference between sale amount and appraisal be deducted

>> as a capital loss?

>> One answer from a tax professional was yes, it is deductible on Sch. D

>> for the two surviving children that did not live in the house (limit

>> $3000 yr)

>> this question was on another tax forum and it's not my exact personal

>> situation but I am interested in other opinions if this is a

>> deductible "loss"

If, by "another tax forum", you are referring to the "funny farm",
we all know its value.

> I'm not a tax professor, but I think a 1/3 interest in a personal

> residence cannot produce a tax deductible loss. I would also be

> suspect of a Jly 2007 apreisal

The loss on a personal residence is obviously not deductible.
But this was an inheritance and it is similar to the loss on
securities.

The 2007 appraisal was not within six months of death. Thus, it
would not be unreasonable for it to be tossed out upon audit.
OTOH home values have decreased sharply over the last two years.
It should not be difficult to get written opinions of other
appraisers as to the Nov. 2007 value.

Once again we have an example of how expensive tax planning
after-the-fact can be.

Dick

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Posted by ed on February 6, 2009, 10:55 pm

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On Feb 6, 4:24 pm, rdad...@panix.com (Dick Adams) wrote:

> >> Mother passed away in Nov. 2006. Her house was left to three

> >> surviving adult children. One child lived in the house until it was

> >> sold in 2008 for $200,000. No appraisal done at death but in June,

> >> 2007 an appraisal was done and the value was $300,000. Can the

> >> $100,000 difference between sale amount and appraisal be deducted

> >> as a capital loss?

> >> One answer from a tax professional was yes, it is deductible on Sch. D

> >> for the two surviving children that did not live in the house (limit

> >> $3000 yr)

> >> this question was on another tax forum and it's not my exact personal

> >> situation but I am interested in other opinions if this is a

> >> deductible "loss"

> If, by "another tax forum", you are referring to the "funny farm",

> we all know its value.

> > I'm not a tax professor, but I think a 1/3 interest in a personal

> > residence cannot produce a tax deductible loss. I would also be

> > suspect of a Jly 2007 apreisal

> The loss on a personal residence is obviously not deductible.

> But this was an inheritance and it is similar to the loss on

> securities.

> The 2007 appraisal was not within six months of death. Thus, it

> would not be unreasonable for it to be tossed out upon audit.

> OTOH home values have decreased sharply over the last two years.

> It should not be difficult to get written opinions of other

> appraisers as to the Nov. 2007 value.

> Once again we have an example of how expensive tax planning

> after-the-fact can be.

> Dick

> --

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> << The foregoing was not intended or written to be used, >>

> << nor can it used, for the purpose of avoiding penalties >>

> << that may be imposed upon the taxpayer. >>

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text -

> - Show quoted text -

I should think almost 2 years with a relative living in it free
should pretty well establish it as a personal residence rather than
rental or investment.

ed

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Posted by Dick Adams on February 7, 2009, 12:12 am

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> rdad...@panix.com (Dick Adams) wrote:

>>> I'm not a tax professor, but I think a 1/3 interest in a personal

>>> residence cannot produce a tax deductible loss. I would also be

>>> suspect of a Jly 2007 apreisal

>> The loss on a personal residence is obviously not deductible.

>> But this was an inheritance and it is similar to the loss on

>> securities.

>> The 2007 appraisal was not within six months of death. Thus, it

>> would not be unreasonable for it to be tossed out upon audit.

>> OTOH home values have decreased sharply over the last two years.

>> It should not be difficult to get written opinions of other

>> appraisers as to the Nov. 2007 value.

>> Once again we have an example of how expensive tax planning

>> after-the-fact can be.

> I should think almost 2 years with a relative living in it

> free should pretty well establish it as a personal residence

> rather than rental or investment.

The other two have a loss if they can produce evidence that
the FMV at the time of death was more than the sale price.
A smidgen of tax planning could have made a difference for
all involved.

But my question is "How long does someone living in a property
have to move out before they lose the deduction for loss on sale?"

Dick

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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decrease in value on inherited property - deductible ?