Is this true even for inherited properties? I thought the primary residence exclusion only applied if you actually owned the home, not if you inherited it?

The primary residence exclusion applies to any home you own and use as your main home, regardless of how you acquired it. If you inherited the property and then lived in it as your primary residence, those years of use count toward the 2-out-of-5 year requirement. What matters is ownership and use, not how you originally obtained the property. If you inherited it and immediately sold it without living there, then no, you wouldn't qualify. But if you lived in the inherited house after receiving it, those years absolutely count toward potential primary residence exclusion.

You can get a retroactive appraisal! I was in this exact situation. Find a qualified appraiser who specializes in retroactive valuations - they'll research comparable sales from that time period to establish what the property was worth when you inherited it. It costs a few hundred dollars but can save you thousands in taxes by properly establishing your basis.

That's super helpful - I had no idea retroactive appraisals were even a thing! Did you have any issues with the IRS accepting a retroactive appraisal when you filed your taxes? I'm worried they might question it since it wasn't done at the actual time of inheritance.

This is super important! Alaska has some unique property rules. OP should definitely check if the property was in an area with subsurface rights or native corporation interests because that can change everything about how it's reported.

Absolutely right about the subsurface rights. The other thing to consider is whether the property was received via a Native allotment or corporation, as these have different tax treatments than standard inherited property. There are special provisions for Alaska Native lands that don't apply elsewhere. If the property was in a remote area, sometimes the assessment records aren't as detailed as they would be in more populated areas, so you might need to look for comparable sales from newspapers or other records from 2007. Some Alaska boroughs have surprisingly good historical data available online now.

Which software did you end up using that worked? I'm in a similar situation for 2024 and worried about making the same mistake.

This makes so much sense now! I think I was overthinking the questions because unemployment feels different than a regular job, but from a dependency perspective, I'm still supporting myself. Did you end up just answering "yes" to the question about supporting yourself with earned income even though unemployment was part of your support?

Yes, I answered "yes" to supporting myself with earned income, even though a good chunk of my income was unemployment. The key is understanding what TurboTax is really asking - they're trying to determine dependency status, not doing a technical breakdown of income types. For dependency test purposes, the important thing is that you're supporting yourself (versus being supported by parents), not the technical classification of each income source. Once I answered "yes" to supporting myself, TurboTax correctly skipped Form 8615 and everything else fell into place. Form 8615 is specifically for children/students who ARE dependents and have unearned income above certain thresholds. Since you're not a dependent, that form shouldn't apply to you regardless of how much of your income is "earned" vs "unearned.

No, unemployment benefits are definitely considered unearned income for tax purposes. Even though you might have paid into the system while working, the IRS classifies unemployment compensation as unearned income - similar to interest, dividends, or other income you didn't directly work for. This distinction matters for things like the Earned Income Tax Credit (which requires earned income), but in OP's case, the key issue isn't about earned vs. unearned income - it's about dependency status. Since they support themselves and can't be claimed as a dependent, Form 8615 wouldn't apply regardless of how their income is classified.

Thanks for this suggestion! Which tax software were you using? I'm on TaxAct for Business, and I'm wondering if that might be the issue.

I was using ProSeries when I had that issue. With TaxAct, you should be able to check for updates by going to the Help menu and looking for "Check for Updates" or something similar. If you're using their online version rather than desktop software, try clearing your browser cache or using a different browser entirely. Sometimes these issues can also be related to the subscription level you have - some tax years might not be available if your subscription doesn't cover that period. Might be worth checking with TaxAct support directly if the update doesn't resolve it.

I filed our partnership extension last week using UltraTax and had no issues selecting the 2023 tax year (for filing in 2024). Everything processed normally. So I don't think it's an IRS-wide system issue.

Definitely this! Also reach out to the SEC and FINRA if this "advisor" claimed any professional credentials. Even if they were overseas, these agencies track these scams and sometimes can help with recovery.

Thanks for this advice. We did file a police report but I didn't know about adult protective services or the IC3. I'll definitely look into those resources today. Mom is so embarrassed about all this that she's been reluctant to tell anyone, but I'm trying to get her all the help possible.

Good point about wash sales, but it likely doesn't apply here since this wasn't a normal market transaction where she sold at a loss. This was essentially theft through transfer. But you're right that she should avoid buying substantially identical securities within 30 days if she wants to ensure the loss deduction isn't deferred.