Capital Loss on Inherited Home

Ken2132

An inherited home was the primary residence of the decedent. It was sold 4 months after the inheritance at a loss from the FMV at the time of death. It was vacant during this time. Is is treated as a long term capital loss (investment property) or can the loss not be claimed (personal use for the decedent)?

MatthewD

Hello Ken2132,

The step-up value on the basis of the home only applies to a surviving spouse or the beneficiaries. At the time of death you do not use the FMV as the basis for the decedent. Since the step-up value does not apply to the decedent, the sale below the FMV cannot be claimed as a long term capital loss on the decedent's return.

However, the beneficiaries can claim the long term capital loss on the sale on their returns.