Additionally, does that mean we need to file taxes in the state in which the sale took place? It took place in Indiana, but we reside in North Carolina. Thanks!
-- Courtney
Dear Courtney,
I'm not sure why the tax preparation outfit you used would tell you to not report the sale of inherited property, especially when you have a loss to claim. The only exclusion for reporting the sale of real property is when it is the sale of your main home, and you don't have any taxable gain to report as a result of the exclusion.
You also don't have to report the sale of personal assets that are sold at a loss, which is not deductible. For example, you wouldn't report the sale of a personal-use automobile because the loss is not deductible.
Also note that inherited assets automatically are considered long-term property even if sold within one year of death. You would report the loss of the inherited property on Schedule D as long-term.
You should file a nonresident tax return in the state where the property is located to avoid future inquiries from the taxing authorities.
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