Mrs. Heyer inherited real estate from her mother. The mother's basis in the real estate was $382,000, and the fair market value at the date of the mother's death was $900,000. The mother's taxable estate was only $2.4 million, so the estate did not owe any federal estate tax. This year, Mrs. Heyer sold the real estate for $875,000. Compute her gain or loss recognized on sale.

Question

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Mrs. Heyer's basis in the inherited real estate is the fair market value at the date of the mother's death, which is $900,000. Since she sold it for $875,000, she would recognize a loss of $25,000 ($900,000 - $875,000). However, since the loss is a personal loss and not related to a business or investment, it is not deductible on her tax return. Therefore, her recognized gain or loss on the sale is $0.

Mrs Heyer Inherited Real Estate from Her Mother