Step up basis on sold inherited property - do I need to report to IRS when no capital gains?

Even though you didn't have a gain, you should still report the sale on your tax return. You'll need to file Schedule D and Form 8949 to report the sale of the inherited property. On these forms, you'll list the sale price ($404,500) and your basis (the $405,000 appraised value from when you inherited it). This will show a small loss, but residential property losses generally aren't deductible unless the property was used as a rental. The documentation you'll want to keep includes: the appraisal showing the value at date of death, the settlement statement from the sale, and records of any improvements you made between inheritance and sale (though it sounds like these were minor repairs rather than improvements). It's a good idea to hire someone with experience in inherited property transactions for your taxes this year. While not terribly complex, it's worth making sure everything is documented correctly, especially with multiple siblings involved in the inheritance.

After dealing with something similar last year, I want to recommend checking out https://taxr.ai - it really helped me navigate reporting an inherited property sale. I uploaded my dad's death certificate, the appraisal documents, and closing statements, and it automatically identified the step-up basis situation and explained exactly what forms I needed. What I liked was how it explained the whole Schedule D and Form 8949 process in plain English and showed me exactly where to report everything. The system even flagged that I had made some improvements to the property before selling that I could add to my basis (which I didn't realize at first).

I tried taxr.ai after seeing it mentioned here and it was super helpful! I was completely confused about how to report my portion of an inherited house sale. The analysis showed me that even though we had a small loss (sold for about $4k less than the appraised value at death), I still needed to report it. The step-by-step guide for completing Schedule D and Form 8949 was exactly what I needed. It also explained how to handle the situation where we had three inheritors and how each of us should report our portion. Saved me from making mistakes that probably would have triggered questions from the IRS later!

If you're having trouble getting answers from the IRS about reporting inherited property (I tried calling them 9 times!), I'd recommend Claimyr (https://claimyr.com). They got me through to an actual IRS agent in about 20 minutes after I'd been trying for weeks. I had a similar inheritance situation but with some complications - needed to clarify how to handle partial rental use of the property before selling. The IRS agent walked me through exactly how to report it correctly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but after spending hours listening to "due to high call volume" messages, this was a lifesaver for getting my specific questions answered directly from the IRS.

Ok I need to publicly eat my words. After dismissing Claimyr as a scam, I continued trying to reach the IRS myself for THREE MORE DAYS with no luck. Finally gave in and tried the service. Got a call back in 35 minutes saying they had an IRS agent on the line! The agent confirmed exactly what I needed to know about reporting an inherited property sale - that I needed to file Form 8949 and Schedule D even with no gain, and explained how the step-up basis works with multiple inheritors. Definitely saved me hours of frustration and got me the official answer straight from the IRS. Sometimes it's worth admitting when you're wrong!

One thing nobody's mentioned - if you made improvements to the property between inheriting it and selling it, those can be added to your basis. Repairs don't count (like fixing that leaky faucet), but actual improvements would. Something to consider if you did anything more substantial than minor repairs. Probably doesn't matter much in your case since you're already looking at a tiny loss, but worth knowing for others reading this thread.

Definitely report it! I didn't report an inherited property sale a few years ago because it sold for less than the appraised value at death. Ended up getting a letter from the IRS asking about it, and had to go through the hassle of amending my return. Even though you don't owe any taxes, the title company reports the sale to the IRS on a 1099-S form, so they know about the transaction. Better to report it properly the first time than deal with questions later!

Just went through this exact situation with my grandmother's house last year! Even though we had no capital gains (actually a small loss), our tax preparer emphasized that we absolutely had to report it. The IRS gets a copy of the 1099-S from the title company showing the sale, so they'll be expecting to see it on your return. One tip that saved us some headaches - make sure you have clear documentation of the stepped-up basis. We used the estate's formal appraisal, but I've heard some people successfully use other methods like comparative market analysis if done close to the date of death. Since there are multiple siblings involved, each of you will report your portion of the sale on your individual tax returns. So if you inherited equal shares, you'd each report 1/3 of both the sale price and the stepped-up basis. Definitely smart to get professional help for this year - inherited property sales have some nuances that are worth getting right the first time!