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How to report sale of inherited property on tax return Form: What You Should Know
This is a simplified version of the original form, and it will not return the correct amount to you Tax Gifts of Real Estate From a Beneficiary With and Without a Will July 15, 2023 — The gift of real estate made to you can be reported in 2018. However, if you made a gift of real property with a will in 2017, you can't report any capital gains on the resulting gain. When To Report Other Sale of Real Estate (including property acquired without a will) This is the tax-free rule: If property is donated, transferred, or exchanged to a party other than a surviving spouse of the deceased, when the property becomes a gift or exchange after death and property received from the deceased party cannot be considered capital, then the donor may be able to report a capital gain or loss in subsequent years on that exchange. In some cases, the recipient may also be able to report a capital gain or loss in subsequent years, even though the gift or exchange was made before death. The donor may also be able to report a capital gain or loss on the subsequent transfer of the property. In these cases, the donor should be treated as having a constructive possession period and any gain on the subsequent transfer of the property must be reported in the year of the gift or prior disposition. For more information on the capital loss rules and rules for a constructive possession period, talk to a tax advisor How To Add the Market Value of Your Inherited Property to Your Taxes — When to Report When the property becomes a gift or exchange after death and the cost of the inherited property is capital, you can't report any capital gain or loss in any subsequent year. If, however, the cost of the inherited property is non-capital, such as if the cost is a mortgage or other obligation, there is no capital gain or loss tax-free for the property because the sale was a gift and the recipient couldn't take the gain or loss. If the property is a qualified education expense, you can claim a capital loss in any subsequent year if you were able to realize a gain in the taxable year you acquired the property, which was also the year you sold or exchanged it. If you disposed of property to another taxpayer in a prior year that you used to reduce your taxable income, you can claim a capital loss in any subsequent year if you realized a gain in the taxable year the proceeds from the disposition of the property were used to reduce your taxable income.
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