turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

jeanettemcmurtry
Returning Member

Tax on sale of inherited property

Need to sell house of deceased parents and wonder what is best for taxes.  

 

If I sell my share of the inherited house at 1/2 FMV to a sibling, will I have to pay capital gains or income taxes on the amount she pays me for mys share?

 

If we sell to a third-party and not each other at FMV will there be taxes we need to split and account for our on our returns as this is an inherited property?

 

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

6 Replies

Tax on sale of inherited property


@jeanettemcmurtry wrote:

If I sell my share of the inherited house at 1/2 FMV to a sibling, will I have to pay capital gains or income taxes on the amount she pays me for mys share?


Are you selling your entire share of the house to your sibling at 1/2 FMV....

 

...or are you selling your entire 1/2 share to your sibling at FMV?

KarenL4
Employee Tax Expert

Tax on sale of inherited property

Hi, jeanettemcmurtry,

Your question has some of "it depends" to my answer.  First, it doesn't matter if you sell the house to your sibling or a third party, you are potentially looking at a gain or loss on sale, assuming you have not owned and lived in the house as your residence for two out of the last five years. If you just acquired the home through inheritance, that rule won't apply to you, but I am unsure how long you held the property before considering selling.  This article explains in general about home sales.

If you just inherited the house, and are considering selling, there may not be much gain or loss as you get what is called a "stepped up basis" on the home, typically with the basis stepped up to the fair market value of the inheritance at the date of death (there is an alternate valuation date possible, just as an FYI).  This article explains "step up" in basis.

If you and your sibling each own 1/2 the house and sell it, you should receive separate sales information and would separately account in your taxes for your piece of the house (e.g., proceeds and basis split).

Hope this helps.

**Please cheer or say thanks by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Regards,

Karen

TurboTax Expert

 

 

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
jeanettemcmurtry
Returning Member

Tax on sale of inherited property

Per your question, my sister wants me to sell my share of a houewe inherited to her so she own the full house.  So if I agreed,I would sell my 1/2 of the property which we both own to her at a set amount, likely at half the FMV at time of parent's death, right?

 

She owes me a lot in damages in relation to this transaction. So would I have to pay tax on the damages I am able to get paid back from her that would be above 1/2 the value of FMV?

 

Thanks

 

KarenL4
Employee Tax Expert

Tax on sale of inherited property

Hi, jeanettemcmurtry,

While I cannot suggest the sale price, if you sold 1/2 the inherited property at 1/2 the fair market value at the valuation date (typically the date of death) you would have no gain or loss (or might have a  loss for the selling expenses or other increases to basis).

 

I am unsure what you mean about damages, but this article may help in determining the taxability of a settlement.

 

Hope this helps.

**Please cheer or say thanks by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Regards,

Karen

TurboTax Expert

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Tax on sale of inherited property


@jeanettemcmurtry wrote:

She owes me a lot in damages in relation to this transaction. So would I have to pay tax on the damages I am able to get paid back from her that would be above 1/2 the value of FMV?


That would be a legal matter, and you might want to consult local legal counsel.

 

https://www.avvo.com

mblumenthal
Employee Tax Expert

Tax on sale of inherited property

Inherited property gets a step-up in basis. What this means is that your basis in the house you inherited is whatever the market value is on the day the original owner passed away. So, on a sale of the house you would figure any gain on the excess of the selling price over your stepped-up basis. (Or one-half of that in your scenario.)

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies