If you sold inherited property, you'll generally report the sale as a capital gain or loss on your tax return. Inherited property receives special tax treatment, including a unique basis calculation and a long-term holding period regardless of how long you actually owned the property before the sale.
To enter the sale in the program, follow these steps:
- Go to Federal.
- Select Income.
- Choose Investments.
- Select Stocks, Mutual Funds, Cryptocurrency, Collectibles, etc.
How Do I Complete the Capital Gain Entry?
When entering the sale, you'll be asked to provide several details about the property.
Form Belongs To
Select the taxpayer or spouse who inherited the property.
Description of Property
Enter a brief description of the asset, such as:
- Inherited Home
- Inherited Property
- Inherited Real Estate
Date Acquired
Inherited property is generally treated as a long-term asset.
Select the Alternate Option checkbox and choose Inherited - Long Term from the drop-down menu.
Date Sold
Enter the date you sold or otherwise disposed of the property.
Sales Price
Enter your share of the sales proceeds received from the sale.
Cost or Basis
For most inherited property, your basis is the property's fair market value (FMV) on the decedent's date of death.
You may be able to determine the fair market value by:
- Reviewing public property records
- Comparing sales of similar properties in the same area
- Obtaining county assessment information
- Using a professional appraisal
The basis is important because it is used to calculate your gain or loss on the sale.
Adjustments
Enter any applicable adjustments, such as:
- Selling expenses
- Commissions
- Closing costs related to the sale
- Other allowable adjustments that affect your gain or loss
What If the Property Was Inherited by Multiple People?
If you inherited the property with other heirs, each person generally reports only their portion of the sale on their individual tax return.
Example
Two siblings inherit a home from a parent and later sell the property.
If each sibling owns 50% of the property, each sibling generally reports:
- 50% of the sales proceeds
- 50% of the basis
- 50% of any selling expenses
Each person reports only their share of the transaction on their own Schedule D and related forms.
Check Your Form 1099-S Carefully
Before entering the sale, review your Form 1099-S or other closing documents.
Some forms report:
- The full sales price of the property, or
- Only your share of the sale proceeds
Knowing which amount was reported will help ensure that you enter the correct figures and avoid overstating or understating the transaction on your tax return.
How Is Gain or Loss Calculated?
Your gain or loss is generally determined by comparing:
Sales Price
minus
Basis (fair market value at date of death)
minus
Allowable selling expenses
If the result is positive, you may have a capital gain. If the result is negative, you may have a capital loss.
Because inherited property is generally treated as long-term property, any resulting gain or loss is usually reported as a long-term transaction.
Keep Good Records
When reporting the sale of inherited property, keep copies of:
- The estate documents
- Property appraisal or valuation records
- Closing statements
- Form 1099-S
- Records of selling expenses
- Documentation showing your ownership percentage, if multiple heirs were involved
These records can help support the basis and gain or loss calculation if questions arise later.
Key Takeaway
To report the sale of inherited property, enter the transaction in the Investments section of the program, select Inherited - Long Term as the acquisition type, and report your portion of the sales price, basis, and selling expenses. If multiple heirs inherited the property, each person generally reports only their share of the transaction on their own tax return.
You can read more about determining the basis of inherited property here.