Question

I have a question about how to calculate capital gain. My siblings and I inherited our mother’s home. I bought the house from the other siblings and later sold it. What is my basis of inherited property — How do I report this transaction?

Answer

If you need to know how to calculate capital gain, take these steps:

  1. Determine the basis. For basis of inherited property, the basis is the fair market value (FMV) of the home on the date of death. However, since you bought the house from your siblings, you’ll follow this process to find the basis:
    • Start with the purchase price.
    • Add the FMV of your inherited share.
    • Subtract any buyer’s settlement expenses.
  2. Determine the amount realized on the sale. The amount realized is the sales price minus settlement charges the sellers pay.
  3. Find the gain or loss. Subtract your basis from the amount realized. If you have a positive number, there’s a gain. If you have a negative number, there’s a loss.

Report capital gains and losses on Form 8949. If you used the home for your personal use only or sold it to someone related to you, you can’t claim a capital loss. However, you should still report the sale on Form 8949.

Related Topics

Related Resources

Calculate Cost Basis For Stock Options

What should you know before you calculate the cost basis of stocks for tax purposes? Learn more from the tax experts at H&R Block.

Investment App Taxes – Robinhood, Acorns & More | H&R Block

Learn more about the tax implications of investment apps like Robinhood, Acorns, Wealthfront & Stash with H&R Block. Accurately report all investment income

myRA Retirement Plan

Learn more about the myRA retirement planning account by the U.S Treasury Department from the tax experts at H&R Block.

How Renting Out Your Extra Bedrooms Affects Your Taxes

Thinking about renting out a room in your home? Learn more about the potential tax implications with the experts at H&R Block.