Myself and two of my siblings inherited a home when our mother died in 2005. It's value at the time was about $180,000. In 2013, we sold the house for $60,000 and each of us received about $18,000 from the sale. Will we owe any taxes on this and do I need to report this on any tax form?

ANSWER

The BIDaWIZ Team's Answer:

The short answer is that you will not owe taxes on the sale. Here's why. At the time of your mother's death, you received a step-up in basis of $180,000 per the Internal Revenue Code Section 1014. Then, since the home was sold for less than its basis of $180,000, there is a capital loss. However, you cannot deduct the capital loss on your return as losses on personal residences are not deductible. It would only be deductible if it were a rental property. In terms of reporting the loss, if received a Form 1099-S, you must report the sale on Form 8949 even though the loss is not deductible. Enter "L" in column (f) and enter the amount of the nondeductible loss as a positive number in column (g). This is referenced in IRS Publication 523.