I purchased commercial property that had a house on it. Can I take a loss for the difference between the appraised value and what I received?

I purchased commercial property that had a house on it. The house was appraised at $60,000 (not counting the $40,000 for the land it was on). I sold the house to a moving company for $1,700, the most I could get, so I could develop the property. Can I take a loss for the difference between the appraised value and what I received?

You can deduct a tax loss on the sale of property purchased for business or investment purposes (you can't deduct a loss on property held for personal purposes). The question in your case, however, is how to determine your actual loss. You have to apportion what you paid for the commercial property as a whole to create a tax basis for the house you sold. Reliance on an appraisal may be an appropriate way to figure the allocation. However, if the sale of the house was shortly after the purchase of the property, then the IRS could argue that the appraisal was wrong and the correct allocation should be closer to the payment received for the house. Remember, however, that you must reduce the tax basis of your remaining interest in the property by the basis you allocated to the house that was sold.