Sale of inherited land

[David]

Client inherited a house and a separate piece vacant land. He sold both in 2013.

Based on the DOD (2010) value he will have a gain from the sale of the house.

Based on the DOD (2010) value he will have a loss from the sale of land. Furthermore, my client has a five year note from the buyer.

My questions are:

1. Is the vacant land considered personal property and therefore, the loss is not deductible?

2. If the loss from the sale of vacant land is deductible I am thinking the loss has to be taken proportionately each year during the installment period just as a gain would be? I have never had an installment sale loss so I want to make sure my thinking is correct.

Thanks for your help.

[jklcpa]

The land is most likely investment property, and its sale would be reported as a capital loss on Sch D. Installment method is not allowed for losses.

[mcb39]

Judy is correct. I just read up on installment sales this morning for another client who is contemplating purchasing a piece of land.

[David]

Thanks for helping me with this.

So the client gets to take the full loss in 2013 even though he will be receiving the sale proceeds over 5 years?

[Lion EA]

Yes, unless it was personal use property to your client: used as grounds for the house he lived in or for hunting or store his cars/equipment or.... As long as it sat vacant during your client's ownership, it's probably investment property. Ask a few questions to determine its use.

[David]

OK, thanks.

Since he inherited the vacant land does it matter how the decedent used the land or only how my client has used the land since the DOD?

[jklcpa]

It would be based on your client's use.

[David]

Thanks for your help, everyone.

[michaelmars]

Search here, this topic has been covered extensively in the past. And since this is new to you, keep in mind, any inherited property is automatically long term even if sold the day after dod.