Sale of Inherited House

[GraceNY]

Owner died in July 2009. House was appraised in August 2009 for $200,000 (have copy of actual appraisal done by reputable appraisal firm). House was sold in October 2009 for $170,000 ("contract sales price" per HUD-1). Lower price 'cuz seller was looking for a quick sale.

1099-S to my client shows the $170,000 in box 2 as the gross proceeds.

(1) Comments on using "appraised value" OR "sales price" as beginning basis?

(2) The HUD-1 shows settlement charges to the seller in the amount of $1,500 which I know I can add to the basis,

however, I am not clear on "seller's concession" for $8,500 which also appears on HUD-1 and reduces the

amount due the seller. The $8,500 is a reduction or an addition to basis or has no bearing on basis?

Thank you in advance for your input.

Grace

[Pacun]

Why don't start by telling us the use of this house by the original owner?

[GraceNY]

Why don't start by telling us the use of this house by the original owner?

Personal "primary" residence (No rental activity. No buisness-use).

Grace

[Pacun]

Personal "primary" residence (No rental activity. No buisness-use).

Grace

What difference does it make if you use one basis or the other?

[mcb39]

Capital Loss can be taken on sale of inherited house which is always LT......I understand where she is coming from, I just don't know in this messed up economy, which way will fly. I have very little research material with me this weekend.

[jainen]

>>Lower price 'cuz seller was looking for a quick sale<<

The licensed appraisal only gave an estimate based on general market conditions for a theoretical buyer and seller. Obviously those conditions did not completely apply to this particular transaction, because almost immediately the actual buyer and seller ignored them.

In my opinion it would be unconscionable to pretend that he lost $30,000 in two months, unless you can show that property values were otherwise crashing at a rate of 90% last year.

[Crank]

Since the buyer accepted a lower price because he was looking for a quick sale that would imply that he did not sell the house at its current market price ... in my opinion.

[kcjenkins]

FMV is what an independant buyer and an independant seller both agree on. So I don't see any loss over the closing costs. Appraisal is just an educated guess, while the sale is actual proof. Given the short time frame, it would be hard to justify taking such a loss.

[GraceNY]

Owner died in July 2009. House was appraised in August 2009 for $200,000 (have copy of actual appraisal done by reputable appraisal firm). House was sold in October 2009 for $170,000 ("contract sales price" per HUD-1). Lower price 'cuz seller was looking for a quick sale.

1099-S to my client shows the $170,000 in box 2 as the gross proceeds.

(1) Comments on using "appraised value" OR "sales price" as beginning basis?

(2) The HUD-1 shows settlement charges to the seller in the amount of $1,500 which I know I can add to the basis,

however, I am not clear on "seller's concession" for $8,500 which also appears on HUD-1 and reduces the

amount due the seller. The $8,500 is a reduction or an addition to basis or has no bearing on basis?

Thank you in advance for your input.

Grace

Thanks for comments on "appraised value" or "sales price" as begining basis.

What about the seller's concession for $8,500? A reduction or an addition to basis or has no bearing?

Grace

[jainen]

>>What about the seller's concession for $8,500?<<

It is further proof that the buyer and seller agreed the appraised value was much higher than actual FMV.

[rick in cal]

I agree that the $8,500 is just a reflection of FMV and not deductable and that a $30,000 or $38,500 reduction in value couldn't have happened over 3 mo. but in this market the property's value could have easily fallen 12 to 16% over a years time or 3 to 4% over 3 mos. This would compute to a $6,000 to $8,000 loss (hypothetical). I would have your client speak to the appraiser and ask how he arrived at his property value number and also get some second opinions from real estate brokers using comparative sales in July and October to see if you can document a more realistic loss. If you get a few professionals to arrive at a similar reduction in FMV I would advise your client that it is a deductable loss that could be challanged.