Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.
01-25-2018 12:31 PM
Hi everyone. My father passed away in November 2017 and I am personal representative of the estate. In his will he left everything to my sister and I. The main asset of the estate was his house. I did not transfer the property into my name and we are now selling it through the estate.
Will the estate have to pay capital gains taxes on the property? How are these taxes calculated? What is the base cost of the property, what he paid for it in 1958 or the fair market value on the date of his death?
Besides the gains on the property, his estate will have no other income. There are no investments of any kind.
Thanks for your help.
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01-29-2018 11:59 AM
I am so sorry to hear about the passing of your father. I cannot imagine how hard this must be for you and your sister.
Regarding your tax question, the estate would receive a step-up in basis to the fair market value of the home upon the date of the father’s death. The estate would report the sale of the home on Schedule D on Form 1041. Likely there won’t be any gain or loss if the home is sold soon after his death. If there is any gain, it will be long term capital gain, which receives the favorable rates. Assuming the proceeds from the sale are passed to the beneficiaries in the same year as the sale, any gain recognized will pass to the beneficiaries via Schedule K-1. If the proceeds are not distributed in the same year as the sale, the gain will be taxed at the estate level.
Thanks for coming this forum.
03-10-2018 03:46 PM
Thanks for the info. It was a great help.
I have another question. We've sold the house for exactly what it was worth when he passed so no capital gains. After paying the mortgage, we have about $50k to split with my sister. How is this money treated? Would it be inheritance or maybe regular income?
Thanks again for all your help!