@frugal 2021 Your estate & Living Trust attorney should be able to give you more specifics on what portion of what is distributed from the estate to you will be taxable to you personally. That portion I can't comment very much on.
But you comment on what I will describe as the "inherited real estate transfer of property tax" in California, which this year was redefined by Proposition 19. I found this article that discusses it: Article on Proposition 19.
I am only commenting on what I understand to be the tax implications, and these are not income tax but property tax implications. For an inherited property (which Proposition 19 defines narrowly; your attorney can probably assist in determining if this applies to you), Proposition 19 allows you to sell the property, purchase another property, and be liable for the property taxes of what the original value of the home was plus the difference of the sale of the inherited home and the purchase of the new, if the new home cost more. It's easier to give an example:
Let's say your mom paid 100,000 for the home she purchased, and the state has been assessing real estate taxes on this value. Obviously, the property has increased in value, so when you go to sell the home, it's now worth $800,000. Under the law, if you purchase a qualifying new home within 2 years for no more than $800,000, your real estate taxes will be figured on $100,000 and not $800,000. If instead, for example, you purchased a home for 1,000,000, the property tax would be figured on $300,000 (the original $100,000 plus the $200,000 difference in the sale price of the old home and the purchase price of the new home).
Those are the transferred property taxes. But capital gains taxes are different. Those taxes (Federal and state) are figured on the gain of the sale of the home based on the home's value at the time of your mother's passing. Since property usually goes up in value, this allows you to claim less gain on the sale, which means less capital gains tax.
And this is just a general picture, but your attorney can probably help you with the specifics.
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