taxes

Estate sale: Taxes on selling Mom's things

Judy O'ConnorDear Tax Talk,
My mother passed away last summer and my brother and I were designated as co-executors. We are in the process of listing the home with an agent. My question is about taxes on an estate sale. If furniture, artwork and decorative items are sold for less than the original price, is the income taxable? Or can we take a loss? If furniture is given to additional family members, is the item deductible? We are contributing most of the clothing to charities.

This entire process is becoming overwhelming! Thank you for your assistance.
-- Clara

Dear Clara,
You can disregard the original purchase price when determining if there is a gain or loss on the sale of your deceased mother's furniture, artwork and decorative items because your "basis" for determining gain or loss is going to be the fair market value of the items at the date of her death.

As you now know, executors have many duties to take care of for an estate. Unless the will specifies who gets what, the decisions regarding what to do with all of the personal belongings are especially difficult. Many items may have a very insignificant value dollar-wise, but the memories associated with them are truly priceless. And then there may be some more valuable items, such as the artwork, that need to be appraised.

Let's go through what your choices are now that it is time to make decisions. You can have an estate sale, divide the belongings among family members or donate items to charity -- or some combination of the three.

For example, take that living room sofa that was originally purchased for $3,500 10 years ago that was worth $500 when your mother died. If you sell it for $500, then there is no taxable gain or deductible loss. If you give it away to a qualified charitable organization, then you can claim the fair market value as a charitable deduction.

Taxes on selling Mom's things | Living room retro style: © Jana Guothova/Shutterstock.com, Sales tags: © little Whale/Shutterstock.com, Vase: © valeo5/Shutterstock.com

Regarding the option of giving items to family members, there is a saying that charity begins at home, and I am sure your family would really cherish having some of your mother's belongings. However, if you do give items away to family members, there is no income tax deduction -- just the satisfaction of knowing you have done something very generous.

I wish you and your brother to experience wonderful memories as you go through this process and keep in mind your mother had all the best reasons in having you two do this together.

Thanks for the great question.

Ask the adviser

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed 4.24%  0.04 4.20%
15 year fixed 3.30%  0.12 3.18%
5/1 ARM 3.42%  0.06 3.36%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.29%  0.01 4.28%
50K FICO-based HELOC 4.04%  0.01 4.03%
100K FICO-based HELOC 3.89% --0.00 3.89%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.79% --0.00 2.79%
48 month used car loan 2.98% --0.00 2.98%
60 month new car loan 3.24% --0.00 3.24%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.95%  0.04 0.91%
2 Year CD 1.15%  0.04 1.11%
5 Year CD 1.75%  0.05 1.70%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.77%  0.01 15.78%
Cash Back Cards 16.48% --0.00 16.48%
Low Interest Cards 10.96% --0.00 10.96%
 
Next
advertisement
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement
Business leaders have long complained the U.S. tax code penalizes businesses. A new study agrees, putting America near the bottom
Partner Center
advertisement

Connect with us