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

I have a question about how to file business taxes with no income — Is filing business taxes with no income necessary?

If your business had no income this year should you still file a tax return? Learn more from the tax experts at H&R Block.

I have a question about double taxed income. If I report non resident income tax on my resident return and my non reside

If you report income earned in a nonresident state on your resident and nonresident return, will you be double-taxed? Learn more from the tax experts

State and Local Income Tax

Learn about state and local income tax with our articles from the tax experts at H&R Block.

Taxes on Alimony and Child Support

Learn about the tax implications of alimony payments and child support from the tax experts at H&R Block.