Q. Is the money received from the sale of inherited property taxable?
A. Simple answer: No. But, taxes aren't simple. What may be taxable is the "capital gain" on the sale of the property. The capital gain is the difference between what you sold it for and the cost basis. Cost basis is usually what you paid for the property. But, in the case of inherited property, cost basis is the fair market value on the date of death.
Q. Do I have to pay taxes on the $24,333.73 (cash to seller) that I received from the sale?
A. No. That is not your capital gain. You sold it for $27,000 (your half of $54,000). After expenses of sale you netted $24,333.73. Your cost basis was $37,500 (half of $75,000). You did not have a capital gain. You had a capital loss of $13,166 (37,500 - 24,334 = 13,166). You get to deduct the capital loss on your tax return**.
**A capital loss on personal use property is not deductible. Most inherited property, even your parent's home, is considered investment property unless you (the heir) used it for personal use.
