inherited house and step up basis

[BHoffman]

Client inherited his mother's house on 02/25/2016 and sold it to an unrelated party on 07/15/2016 for $230k without making any improvements.  

Can I assume the $230k was the FMV on the date of his mother's passing since the dates are so close?  The transaction was reported on 1099-S.

 

 

 

[Roberts]

That's how I'd do it.

[rfassett]

As in most all things tax, it depends.  Was an appraisal done for the estate (inheritance) tax return?  Is the house located in an area of rapid inflation or deflation of real estate prices - and yes, there are still pockets of areas where this goes on?  If real estate prices have been stable and no appraisal was done, then your approach sounds solid.  Be sure, however, that it is a true inheritance.  Clients like to throw that term around even when the house was actually gifted to the children.  Just sayin'

[Lion EA]

Educate your client; and then let your client make the call, if his call sounds reasonable to you.

[BHoffman]

Thanks!

[Terry D EA]

Quote

7 hours ago, rfassett said:

As in most all things tax, it depends.  Was an appraisal done for the estate (inheritance) tax return?  Is the house located in an area of rapid inflation or deflation of real estate prices - and yes, there are still pockets of areas where this goes on?  If real estate prices have been stable and no appraisal was done, then your approach sounds solid.  Be sure, however, that it is a true inheritance.  Clients like to throw that term around even when the house was actually gifted to the children.  Just sayin'

 

I agree totally and you should follow this suggestion

[michaelmars]

If the sale takes place within 6 or 9 [I forget] months of date of death the sales price is automatically assumed to be the FMV. unless you can show improvements made during that time.  In fact if you file with another amount then you have to amend the 706 if the difference would change the tax.

How do I know this? well here in the gold coast of Nassau County. The IRS often does title searches on taxable estates to see what the property sold for.  Aren't we special.  Twice we got notified that a 706 had to me amended. 

Don't forget that closing costs should give you a loss on the sale and any sale of inherited property is considered long term.