An inheritance (a gift) is not subject to federal income tax. "Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance." https://www.law.cornell.edu/uscode/text/26/102 ... So the value of the property inherited is not federally taxed.
However, an income received after inheritance may be taxable (e.g., rental income from a house or dividends from a stock). Upon sale, the gain (if any) on property is taxed (capital gain tax) . The gain is the gross proceeds minus the cost of the sale (commissions, transfer tax, etc.) minus your "basis".
Your basis in inherited property is its fair-market value at the owner's death. https://www.law.cornell.edu/uscode/text/26/1014
So if you sold it that day, you would have no gain, maybe a loss (because of sale expenses). Usually, you sell it sometime later. You will then have a gain on the change in value from the date of death. This is usually not very large, but it depends upon how the market moved between the date of death and sale.
Note, this only applies if you inherit upon the owner's death. If the owner gave you the property while still living, your basis would be their basis.
I don't know about how to handle Puerto Rico or if there is any special treatment of assets in Puerto Rico, so I cannot speak to that.
@jrlm59 I am very sorry for your loss.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
