Reporting the Sale of an Inherited House: Form 8949 & Schedule D

Which forms do I file?

Form 8949 (Sales and Other Dispositions of Capital Assets) for the line-item detail. Schedule D for the summary that flows to Form 1040. If the basis was reported to the IRS (rare for inherited property), use Part II Box D; otherwise Part II Box E or F.

How do I enter the date acquired?

Type the word INHERITED in column (b) instead of a date. This tells the IRS the holding period is automatically long-term, regardless of how recently you received the property.

How do I enter the cost basis?

Column (e) is the stepped-up FMV on date of death (or alternate valuation date), plus any capital improvements made by the heir, plus selling expenses. Keep a copy of the retrospective appraisal with your records.

What if I sold at a loss?

The loss is deductible. Capital losses offset capital gains first; remaining losses offset up to $3,000 of ordinary income per year ($1,500 if MFS), with the rest carrying forward.

Sources

• Form 8949 Instructions
• Schedule D Instructions

Frequently asked questions