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How To Report The Sale Of Inherited Property On Tax Return?

Reporting the sale of inherited property on your tax return centers on establishing its "stepped-up basis." This basis is generally the fair market value (FMV) of the property on the date the decedent passed away. You'll subtract this stepped-up basis from your net selling price (selling price minus selling expenses) to determine your capital gain or loss. Inherited property automatically qualifies for long-term capital gain or loss treatment, regardless of how long you actually held it, a significant tax advantage. The sale must be reported on Form 8949, "Sales and Other Dispositions of Capital Assets," and then summarized on Schedule D, "Capital Gains and Losses." Ensure you retain documentation, such as an appraisal or estate tax valuation from the time of inheritance, to substantiate your stepped-up basis. Accurate reporting is crucial for calculating your correct tax liability on any gain or claiming a deductible loss.

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