Basis of inherited property

[gamacpa]

New client:

1 Mother died in 2022.

2 At time of death only asset was her residence, which bank appraiser valued 1.2M in CA.

3 Market has since tanked and will be sold for approx $800K.

4. Is this taxable loss to be allocated to beneficiaries via 1041 K1's ? 

5  Short term or long term capital loss?

thanks in advance for assistance

[TaxGuyBill · Accepted solution]

Assuming no personal use of the property, yes, it would be a long term capital loss.

However, the value dropping by $400,000 (33%) in less than 8 months seems rather questionable.  Is the sale price of $800,000 FMV?  Is there an appraisal for the current value?  Is it being sold to a related party?

[sjrcpa]

Assuming the loss is accurate, it will pass out to the beneficiaries if this is a final 1041.

Bill has a good point about value declining so much in 2022.

[gamacpa]

Client tells me appraisal  done by Bank appraiser.

Sale not to a related party.

Public listing sale.

Thank you,

[rbynaker]

I don't do 1041s but for that amount of loss, I'd want corroborating evidence.  County assessment?  Second opinion?  You can get a licensed appraiser to give you a retroactive value as of date of death.

A 33% drop in value in <1 year doesn't pass my sniff test.  It's not unheard of and may be defendable under audit but I'd want the client to stock up now with ammunition for that fight.

[BobKamman]

Maybe the location was between a forest fire and a landslide.

[sjrcpa]

What's a "bank appraiser"?