Capital loss status of inherited raw land?

[Rich Carreiro]

Some years ago a relative inherited some raw land. It is
completely vacant and was so while owned by the decedent as
well.

The land wan't being rented out or anything by the decedent
and was not rented out by my relative.

Finally, after years of trying, the relative managed to sell
the land. There's going to be a loss of at least the amount
of real estate commission since land prices in that area did
not go up since the inheritance.

My question -- is this an allowable capital loss or not?
Certainly the land was not being used for any business
purpose.

But since it was not being used for a personal purpose
(neither decedent nor heir lived on it, recreated on it,
extracted resources from it, etc.) can it legitimately be
claimed that the heir was holding the land for investment,
and therefore it is not personal use and the loss is
allowable?

 

[D. Stussy]

"Rich Carreiro" wrote in message
Some years ago a relative inherited some raw land. It is
completely vacant and was so while owned by the decedent as
well.

The land wan't being rented out or anything by the decedent
and was not rented out by my relative.

Finally, after years of trying, the relative managed to sell
the land. There's going to be a loss of at least the amount
of real estate commission since land prices in that area did
not go up since the inheritance.

My question -- is this an allowable capital loss or not?
Certainly the land was not being used for any business
purpose.

But since it was not being used for a personal purpose
(neither decedent nor heir lived on it, recreated on it,
extracted resources from it, etc.) can it legitimately be
claimed that the heir was holding the land for investment,
and therefore it is not personal use and the loss is
allowable?
=============

I don't see any problem with arguing that should the transaction be audited.

 

[removeps-groups]

I don't see any problem with arguing that should the transaction be
audited.

Are you saying he should claim the capital loss but file form 8275 (to
disclose the unusual position) thereby avoiding penalties.

 

[Mark Bole]

Are you saying he should claim the capital loss but file form 8275 (to
disclose the unusual position) thereby avoiding penalties.

It's clear to me that this was investment-use property (not stock in
trade, not business use, not personal use), I see nothing remotely
unusual about it.

 

[D. Stussy]

"removeps-groups" wrote in message

I don't see any problem with arguing that should the transaction be
audited.

Are you saying he should claim the capital loss but file form 8275 (to
disclose the unusual position) thereby avoiding penalties.
====================

That's up to him and how certain he feels that the treatment is correct.

 

[Pico Rico]

It's clear to me that this was investment-use property (not stock in
trade, not business use, not personal use), I see nothing remotely unusual
about it.

--

Mark Bole, EA
Enrolled Agents - America's Tax Experts
http://markboletax.com

I concur.

 

[Alan]

On 2012-12-20 15:02, removeps-groups wrote:
[SNIP]

It's clear to me that this was investment-use property (not stock in

trade, not business use, not personal use), I see nothing remotely

unusual about it.

Mark Bole, EA

Enrolled Agents - America's Tax Experts

http://markboletax.com

Nether do I. I don't have the citations handy, but I know this issue has been litigated in tax court various times and the court has stated that the character of the property changes when it is inherited by a beneficiary who does not use the property for personal use. In fact, I remember a case where the beneficiary was actually living in the inherited house at the time of death of the parent. The court ruled the property was investment property because the beneficiary relocated soon after death and did not subsequently use the property for personal use.

 

[Bill Brown]

"removeps-groups"  wrote in message


Are you saying he should claim the capital loss but file form 8275 (to
disclose the unusual position) thereby avoiding penalties.
====================

That's up to him and how certain he feels that the treatment is correct.

In my opinion, based on the facts presented by the OP, Mark Bole's
post is correct.