My bother and I inherited my mother's home upon her death in 2006 and sold itin 2007. As a non-resident I paid withholding tax on my net proceeds. I am reporting this on Schedule D with cost basis as FMV at time of death minus the seller closing costs (not including the MD income tax withheld). This is results in a long term capital loss. Is this correct?

Also I'd just as soon not deduct the income tax from my federal taxes and then have to report it as income this year. Is this possible?

Zip Code: 94550

This is a great question to ask the attorney who helped with your mother's estate. If an estate tax return was filed for your mother, you'll see the value they placed on her home in that paperwork.

My understanding is that all of your mother's assets were restated to fair market value as of her DOD, so that would be the basis for calculating any gains or losses.

As far as your second question, if the state taxes are the only thing that will make it worthwhile for you to itemize, then elect to claim the standard deduction, and you won't have to pay taxes next year on the state tax refund. My only recommendation is to take a close look at your taxes both ways for both years to make sure that you are really savings taxes with that strategy.

Zip Code: cpa@mdtaxes.com