how do you avoid capital gains tax on an inherited house?

Question

we have recently recieved a house from an inheritance, but if we sell it and buy something cheaper how do we obtain the difference without it being taxed. do you always have to reinvest the money into property of equal value? we would like to sell it and buy something cheaper and also buy a vehicle or two.

Answer 1

Sell it quickly. When you inherit it you get the stepped up basis -- the value of the home on the date of the decedent's death. If you sell it quickly you should realize something close to that and will not have a taxable gain. Once selling expenses are taken into consideration you can still sell it for a bit more and still not have a taxable gain.

Answer 2

Even if you bought another house with all of the proceeds, you'd very likely have to pay taxes on any capital gains.