Capital Gains/Inheritance Tax?

[leetheman81]

Alright you brilliant professionals in the real estate/tax/$ business, i have a question...asking for a friend

Hypothetical scenario:
Family member passes away and all acreage/dwellings (1800 square foot house and doublewide mobile home) are left to another family member in the will. The property is currently being probated into the name of the family member it was willed to. If that family member turns around and sells all property/dwellings left in LESS than a year are they stuck paying the govt a chunk(capital gains, inheritance, death tax?)

If so, is there a way around this such as waiting for a year prior to selling all property?
Ease out both dwellings for a year for a year then sail?

Any and all advice is thoroughly appreciated!
Thanks ODT!

 

[leetheman81]

Realtor

 

[Granite3]

Best to sell right away.

IRS allows value at current market value when a person dies. Relative is only responsible for taxes on any elevated sales price.

At death, house and property are immediately worth current market value, rather than what was paid back when.

A Guide to Selling Inherited Property - SmartAsset

There are many strings attached to selling property that you inherit, including agreeing with other heirs and taxes. Here's what you need to know.

smartasset.com

 

[Granite3]

Currently inheritance/death tax is over 11 million in assets before you are taxed. Double for married folk.

Several states have a death/inheritance tax, but GA does not.

 

[gh1950]

Basis in inherited property is FMV at the time of the owner's death. Time frame of sale is irrelevant.



See Granite3 post. People get all whipped up about the "death tax", but it only effects a minuscule number of people. Plus the people if affects can afford the lawyers and accountants to avoid paying most of it.

 

[Granite3]

If the family member who inherits the property sells it within a year, they may be subject to capital gains taxes. However, there are ways to avoid this by holding onto the property for at least a year before selling. One option is to rent both dwellings for at least a year before selling. This way, the family member can avoid paying any taxes on the sale of the property. Another option is to wait at least a year before selling the property. It will allow the family member to avoid paying inheritance or death taxes. If this information doesn't help you, I suggest you seek financial advice from guys from thefinitygroup.com. I hope you're doing well. Take care of yourself!

This is not applicable or correct.

The "Step up basis" means the property is worth what you sell it for, so no "profit/income is realized, therefore no tax due.

 

[gh1950]

When the executor or trustee performs the property appraisals for the estate, that new "date of death" property appraisal should become the beneficiary's stepped up basis for that inherited property.

If the beneficiary later sells that property that he inherited for a price higher than the stepped up basis.. income tax will be owed on that portion (above the stepped up basis)...

...UNLESS the beneficiary makes that inherited property his personal residence for 2 years out of the previous 5 years before selling.. then up to $250k in profit is exempt from federal income tax, or $400k is exempt if married and filing jointly

Or unless the legatee makes it his principal residence, is over 65, and sells it, and takes a one time lifetime exemption on all the "profit" - as you can see, it's really easy to figure out.

My word of advise, worth what you are paying for it, you are talking about inherited property which gets an automatic tax free boost in the basis, and worrying about the capital gains tax is letting the tail wag the dog.