Sold Inherited Home in California - RE: CA State Return and Franchise Tax

Forum|Forum|4 years ago
February 10, 2022
1 reply
2 views

Picking up where I left off on previous post on how to calculate our gain on an inherited house we sold in CA...
When the sale was culminated, money was put in escrow (I assume) for CA State Franchise Tax. I was told at some point I may get some of that back. I think since I'm a non-resident I will not get a full refund, as it IS a capital gain and IS over $250K.

At any rate.. 1) Please confirm I'm obligated to fill out a CA state tax return. I assume so, especially in light of ---> 2) the only entry I'm aware of at the moment is the capital gain on the sale of the house. It pulls the gain value from the my Federal return and shows a refund of about 66% of the original 3.3% that was pulled out at the sale. This is good news, if it holds up. Does it sound plausible?

Thoughts? Questions?

Thanks in advance!

DaveF1006

Level 15

Yes to question 1. You need to file a California non-resident return to report the sale of the inherited house. Question 2 is confusing to me though when you mention "shows a refund of about 66% of the original 3.3% that was pulled out at the sale".

To determine the capital gains on the house and if this house was never your personal residence, you would use the Fair Market Value (FMV) at the time of the decedents death. Then you would compare the sale of the house with the FMV by substracting the FMV from the proceeds. If the result is positive, you will pay capital gains on the gain. If negative, you will not pay capital gains but you cannot declare a capital loss either.

Normally, if the death is recent, the FMV and proceeds are nearly identical and the capital gains are minimal at best. You also mention a $250,000. Normally, this dollar amount is only considered if you are reporting capital gains on a personal residence if you own and have lived in your home for two of the last five years.

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

LonestarAuthor

Level 5

Thanks! Yea, I knew when I wrote the 66% blah blah it would be confusing... what I mean is, say they took $10,000 at the time of the sale for CA Franchise Tax. When I do the CA return in TurboTax, it shows me getting most of that back, like $7,000. I'd like to assume TurboTax is correct, since it's pulling the sale data from my Fed return, but I'd like understand the why. I'm assuming they 'estimated' high. (?)

KrisD15

Level 15

California does not tax an inheritance.

The Federal government does not tax an inheritance.

ONLY Capital Gain would be taxed.

Your first post indicated that you had over 250,000 in Capital gain.

If that is true, 3,000 tax on a 250,000 capital gain is only .012% which seems pretty low considering California taxes Capital Gain at the regular Income tax rate.

Your Capital gain is the selling price less the Fair Market Value on the date you inherited it (less improvements and selling fees)

If you ever held it as a rental, you need to recapture depreciation.

CA link

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