Inherited Real Estate Question
Let’s say that your parent dies leaving you a portfolio of stocks, and a home on an acre of land. On the day that your parent dies, the stock prices are such that the value of your inherited portfolio is $200,000 (based on the IRS “step-up” valuation rule). You hold the stocks for a few months while their value declines to $150,000, then sell. There is no doubt that you have incurred a $50,000 loss.
Now let’s look at the real estate. Upon inheriting the home and land, you work with a local broker and accept his recommendation to put the home and land on the market for $200,000, establishing this price based on the broker’s analysis of the existing market, prices of equivalent properties, market conditions, but without a formal appraisal. The market is slow such that neither your property nor any other properties sell. So, to move your property, you drop the price, and eventually sell it for $150,000. Have you incurred a “loss” in this sale just as you did in the sale of your stock portfolio? Can you cite an IRS publication dealing with such a real estate situation?