Blog: What Happens When A Property Is Worth Less Than The Date You Inherited It?

Added November 23, 2008 by Ilyce R. Glink

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On the show today, we had a call from someone who wanted to know about selling a home his Dad owned in California. The son, a resident of Georgia, is the executor of his father's estate.

The son wanted to know how selling the property would affect his taxes. His father's total estate is worth less than $1 million. The property had been on the market for $399,000, which is the price that the agent had valued it at on the day of death, but that was 9 months ago and the house hasn't sold. So, the agent wants to lower the price of the property to around $300,000 to hopefully get it sold.

Would the son owe taxes? I said no. He would inherit the property (and the estate) estate tax free. When he sells the property, he'd keep the proceeds without owing any additional taxes.

I did suggest he might want to hire a tax preparer in California (or an enrolled agent www.naea.org) to help him with whatever paperwork he needed to file.

Here some additional information from John Donovan, an enrolled agent in Alpharetta, GA:

I am one of only two listed in Alpharetta , GA 30022. You are correct; your caller will not have any taxes due for his inherited house. Technically the IRS requires an appraisal. I paid $250 for a house and $250 for an apartment building with 9 units for my nieces.

He may not have any problem without an appraisal if the house is sold near the date of death. None of my clients have ever gotten an appraisal. When I prepare the taxes the client has a long term capital loss. Inherited property is always considered long term. The long term capital loss arises from the sales commission, improvements, repairs, & mileage etc. The loss is reported on a Schedule D.

p.s. My favorite gift card is an I bond currently earning 5.64% at the bank or treasurydirect.gov.

November 23, 2008

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