4 siblings inherited a house (trust). Now one sibling is buying the rest out with a loan. Do the siblings that are receiving a lump payment for their portion of the house have to pay taxes on this amount? What type of taxes? What can they do to prevent from having to pay that many taxes (reinvest within 30 days). Only serious answers please. Thanks in advance.
P.S. I don't think capitol gains is an issue, because the mother just died, and there was no increase in value of the house since she died, and now.
2007-10-01 10:05:39 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
If your sibling bought the house at market value soon after the estate was settled there will probably be no tax due. When you inherit property your basis (what you have in the property) is usually the fair market value of the property on the date of death (pub 551 p 9). So if your sales price and basis are the same there is no gain or loss. You will still have to report the sale on Schedule D.
The answer will be different if your sibling bought the property below market value.
2007-10-01 11:55:51 · answer #1 · answered by Charlie & Angie G 4 · 0⤊ 0⤋
Depending on the size of Mom's estate, estate taxes may be due, but you will owe no income tax on the money received from the sale of the home.
Just make sure that Mom's estate owns 100% of the house that is being sold. In some states, the children could have inherited 1/2 of the house when Dad died. If that's the case, capital gains may be an issue.
2007-10-01 18:06:13 · answer #2 · answered by TaxDude 2 · 0⤊ 0⤋
If you sell the part of the house you inherited for no more than it's value when you inherited it, you will owe no tax.
However, you need to report this sale on Schedule D.
Description: House
Purchase date: inherit (type the word inherit into the date field)
Sales date: whatever it is
Basis: Give the sales price plus costs of the sale that you paid (your portion only)
Selling price: Give the selling price (your portion only)
You will have a small loss which can be used to offset other gains. Even if you are not required to file, I recommend filing anyway as an information return.
2007-10-01 20:06:10 · answer #3 · answered by ninasgramma 7 · 0⤊ 0⤋
Since you receive the stepped up value when you inherit there will be no gain if you sell for the same price or less. As long as there is no gain, no taxes are due.
2007-10-01 17:53:55 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 0⤋