@emceebe wrote:
Inheritance is NOT taxed at the Federal level. Is this correct?
In your case, that would be correct in terms of simply inheriting the house.
However, since the house was sold, you need to determine your basis and subtract that from the sales price (less selling expenses).
In this instance, the basis would be the fair market value of the house as of the date of death of the decedent. If the sales price (less selling expenses) was more than that value, you have a gain that would be subject to taxation.
If the sales price (less selling expenses) was lower than the fair market value at the date of death, then you have a loss which could be deductible depending upon how the house was used (if held for investment, the loss could be recognized as a long-term capital loss).
This answer has been verified for accuracy by an Intuit expert employee
