tgmaddox[at]bellsouth.net (Therese G. Maddox) wrote:

- quote -

If the house is sold for MORE than the date of death value,
there will be capital gains and a tax due. Any improvements
made after death are added to cost basis, and may reduce the
gain. Selling expenses, including real estate commission,
reduce the selling price - further reducing any taxable
gain.

However, if the sale occurs shortly after DOD, the IRS may
consider the sale price to be a more valid indicator of
value (vs the appraisal) and would rule that there is no
gain or loss on sale.

Neither of you is entitled to an exclusion on the gain, as
you did not own the house nor live there for two of the
previous five years. The "step-up" in FMV is in lieu of such
exclusion.

Titling the house as co-owners or leaving it in the
estate/trust is not really an issue, if you two are the only
beneficiaries of the estate. If the estate/trust sells the
house, the gain will be passed to you via the 1041/K-1 form
from the executor.

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I have a question about capital gains on a house that my
brother and I received as inheritance from our deceased
father. I understand that the value (stepped up value?) of
the house will be set as of the day my father died. If we
sell it for more, how will that work out with the capital
gains taxes? In our case, the house was appraised for $350k
shortly after he died. We will be able to see it for
50-100k more than that but neither of us have lived in the
house for over 5 years. How does the exemption work for
people who are "co-owners" of property? We have the choice
of putting the house in both of our names or leaving it in a
Trust after the Estate is closed. Does having the house in a
trust change anything?

Thanks!!

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