Basis for Sale of Inherited Vacant House with Years of Paid Real Estate Tax

[ronpxx1]

I inherited a house 10 years ago that has been vacant throughout these years.  However annual real estate taxes have been paid each year.   Do all these real estate taxes add to the basis of the house upon selling it?

[DoninGA]

Real estate taxes paid are not included in the Adjusted Basis of the residential property.  Only the cost of any improvements to the property are included in the Adjusted Basis.

[ronpxx1]

Thank you for replying, but let me ask further.   Pub 551 states: Real estate taxes. If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis.    My particular case is that the house has been in a trust since the owner's death, with named beneficiaries, but with annual real estate taxes paid by the trustee from personal (not trust) money.  In this situation, can those paid taxes apply to the basis?  Or does this become just a matter for beneficiaries to work out on a personal basis (no IRS involvement) with the trustee (also once of the beneficiaries) to make things fair to him?   It seems the "trust" is the seller and owed real estate taxes annually that were paid and not reimbursed by an eventual beneficiary.  Complicated?

[DMarkM1]

Your basis was not affected by the tax payments.  The Publication 551 reference is for the buyer of the property to add to their basis if they paid taxes for the seller in the real estate transaction.  

In your situation the other beneficiaries can gift/give you money to repay your real estate tax payments over the years which will not be taxable to you and assuming the amount of each gift is below the annual reporting threshold ($17,000 for 2023) they will not need to be reported on gift tax returns by the donors. 

Here is a link with more information on gift giving.