Capital gains for inherited condo


B

Bob

My wife inherited a condo when her mother died in 2002 and
sold it in July 2003. She/we did not occupy the unit at
all. The condo was transferred to her name before sale, so
we have to report the sale on our 2003 taxes (I expect a
1099-S). I have two basic questions.

1. How do I calculate basis for use in calculating capital
gain?
2. What documentation do I have to provide to the IRS in
filing our taxes for 2003?

The condo was not appraised for the sale nor for probating
the will (no fed or state estate taxes were owed). I have
read that sales shortly after the date of death often use
the sales price as the inherited basis, but in this case we
waited 9 months. I have prices for a variety of comparable
units that sold late last year and this year (the real
estate agent pulled these together for pricing the condo in
June 2003; it sold at the asking price in July 2003).
Absent any other good way of doing this, I planned to use
the comparable sales from around the time of death (October
2002) to estimate the basis for the unit for calculating
capital gains on the sale. When I report the sale to the
IRS on our 1040 (Schedule D?), do I need to provide any
documentation of how I arrived at the basis value?

Using this approach, the selling price appears to be about
10K or maybe 15K above the comparable sales from late 2002.
(This works out to about 6% increase, which appears
reasonable for the recent market.) I assume I can reduce the
amount received by the commission for the sale (only 3%),
but can I also remove other closing costs ? (Maryland and
local transfer taxes, part of cost of title search, etc).
We did spend any money improving the condo over the 9 months
my wife owned it, just normal bills. I realize this is all
long term gain. I also want to minimize chances of an audit!

This was not a residential sale, so is there any special
form we need to file with our taxes to report the sale,
beyond the basics in Schedule D?

Bob
 
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