me and my girl live in a new home, it is paid off and is in her fathers name. her father is terminally ill and upon his death the house goes into her name. we live in this house now. the house is valued at 280,000 and we wish to sell it immediately upon it becoming hers and buy something around 200,000. what will we be taxed on the 80,000 difference. do we have to reinvest the money from the house into a property of equal value. is there a capital gains tax? how could we go about doing this and what will happen if we do?
2007-04-02 14:06:43 · 4 answers · asked by ben b 1 in Business & Finance ➔ Taxes ➔ United States
She gets a stepped up basis on the date of his death, if she inherits it. Captial gains are zero at that point. She only has to pay taxes on the gain from that day onward. The basis on the date of sale compared to the value of the house on the date she inherited it.
If she owns it and lives in it for two years, during the five years previous to the sale, she still wont have to pay taxes on the first 250 thousand dollars of gain. So she could continue to live in it and still may not have to pay taxes on it when she does decide to sell. If she gets married and files a joint tax return she could exclude 500 thousand of the gain from taxes.
2007-04-02 14:18:29 · answer #1 · answered by jeff410 7 · 1⤊ 0⤋
If a person sells inherited property immediately upon inheriting it, there will be no income tax due.
You will not have to reinvest the money from the house into another property.
The proceeds from the sale can be invested or spent any way the heir chooses. If the proceeds are invested, any income generated is taxable.
2007-04-02 22:08:14 · answer #2 · answered by ninasgramma 7 · 1⤊ 0⤋
You basis, or cost, is the value of the property on the date of her fathers death. If you sell it immediately, there should be no gain. You won't be able to use the 2 year personal residence rule, as she won't live in it for 2 yrs if you sell it immediately; but it shouldn't matter because there should be no gain to tax.
2007-04-02 21:36:52 · answer #3 · answered by irongrama 6 · 1⤊ 0⤋
She will receive the stepped up basis upon her father's death. Assuming that you sell it quickly there won't be any gain and no tax will be due.
The old "rollover replacement rule" was tossed about a decade ago. She can do anything with the money she wants to without any tax consequences on the gain from the sale.
2007-04-02 21:36:51 · answer #4 · answered by Bostonian In MO 7 · 2⤊ 0⤋