What is my tax liability on the sale of property from an inheritance?

Question

My wife and I live in Texas. My wife's father died in April 2006. His estate was left to my wife and two siblings. The proceeds are divided evenly. He owned some land in Oregon that was sold last month. The beneficiaries were listed as the sellers of the property. It was not listed as my father-in-law's property, nor was it listed as belonging to his estate. Her share of the sale was just over $10,500. What is our federal tax liability on the sale of the house? What is our tax liability with Oregon, if any?

Answer 1

The property was transferred to your wife and her two siblings at the date the estate was settled. Their basis in the property was the fair value of the property at the date of your father-in-law's death. Only the amount of increase in value between their basis and the selling price is taxable for federal income tax purposes.

As an example, suppose your father-in-law bought a piece of land for $10,000. On the date of his death, it was worth $25,000. Your wife and her two siblings are now the owners of that land and their basis in the land is $25,000. Suppose they sell it for $31,500. Their gain on the sale would be $6,500 ($31,500 - $25,000). The taxable amount to your wife would be $2,167 and she would have to pay long-term capital gains on that. Most likely, it would be 15% or $325.

I do not know the tax liability in Oregon. As a guess, I would say that it would probably be less than the federal tax liability.

Does that make it clear?

Answer 2

Bash has given you a well evaluation. You too can skim by way of IRS pubs 908 and 4681. HIRE anybody to do your taxes. Do this for the 12 months of the sale, specially if it was once condo estate and for the 12 months of the 1099-C. The quick sale will generate a 1099-S. The quantity nonetheless owed is commonly recourse debt. If it's, the debt will keep at the books of the lender for a even as and they are going to attempt to accumulate from you. In the occasion they cancel the debt (did you detect they may be able to promote it to anybody else?) absolutely, they are going to challenge a 1099-C. This will also be years away. As Bash features out, the insolvency calculation is as of the date of the 1099-C, now not the date of sale. Read your bureaucracy. If it says some thing approximately a "Recovery" they're going to check out to get the money if they may be able to. You say funding estate. What sort? What have been you utilizing it for? As Bash features out, the calculation of obtain/loss is unbiased of financing (in any case, a few persons pay coins for his or her resources). Was it condo estate? I've obvious a few persons have a obtain; I've obvious others have an NOL. If it was once land, did you capitalize any sporting expenditures?

Answer 3

If sold by the estate then the taxes go through the estate. If sold after distribution then it was properly done.

You need to know the basis of the property to figure out the gain on the sale.

Answer 4

If that was his entire estate, there wouldn't be any estate tax on it. Only estates valued at over $2 million are currently assessed an estate tax.

But you need to know it's value at the time of the death of your father-in-law - appreciation after that is subject to taxc for the beneficiaries.

I don't know about Oregon - the above is for federal.

Answer 5

property is valued at the time of death if its not sold at that time then whatever the value of the property at the time of sale minus the value at the time of the death when u got it would be taxed at capital gain..
most inheritance isnt taxed til it reaches 600 grand if my memory is correct
not sure about what oregon would say

Answer 6

Go your local tax consulant .. even HRBlock can give you a quick calculation or go to the IRS site online and type in the question. The site is: www.irs.gov