capital gains

[careyw]

My mother-in-law recently passed away, the deed to her house being in her children's (4) names.  One of her children wanted to purchase the house and the other kids decided to let her do so at an extremely discounted rate.  What are the tax implications here?

[AmyC]

You inherited the house for the value on the date of death. Selling it to a family member changes the rules. You are giving that family member a gift of the difference. If you exceed the gift tax per person (2024- $18,000 and 2025- $19,000) then you may need to file a gift tax return. Depending on the estate, there may not be an additional tax consequence.

For example: Inheritance value is $300,000 divided by 4 is $75,000 each. For 2025, that would mean a discount up to $19,000 each would have no tax requirements. $75,000 -$19,000 =$56,000 per person minimum sale price. $56,000 times 4 equals house sales prices of $224,000 with no tax issues. Less than $224,000 would mean a gift tax return by the 3 gifting the extra money. 

[Opus 17]

The three siblings who sell their shares have no income tax implications as long as they sell for less than fair market value (of their share) on the date of the previous owner's death.  They may need to file gift tax returns.

The 4th sibling (buyer) will need to document the transactions thoroughly, the purchase portion and the gift portion, so they can document their cost basis when and if they sell.  I can't remember whether the gifting aspect changes their cost basis, but for now it will be enough to document everything.  (Appraisal, gift letters, quitclaim deeds or other records of the transfer of ownership and price paid.)