Decedent property sale

[Kimberlybyrne]

• Mom died 2022
• sister has lived in house 20 years
• selling house to split proceeds 4 ways
• home under 250k
• home owned 30+ years
•  

[Opus 17]

You have a lot more space to add details.  For now, I have to assume some facts.

I will assume that the sister lived in the home as her main home, the other 3 siblings did not live in the home, and all 4 siblings inherited the home by Will.  If these assumptions are not correct, the answer below will not be correct.

Each sibling owns 1/4 of the home, with a stepped up cost basis equal to the fair market value on the date the mother died.  You need to determine this cost basis/value, contact a real estate agent for assistance.

When the home is sold, each sibling reports 1/4 the cost basis and 1/4 the proceeds.  They owe capital gains tax on any gain (increase in value) since the mother died in 2022 (they don't owe tax on the whole proceeds, just the gain.). The sister who has lived in the home at least 2 of the past 5 years can exclude up to the first $250,000 of capital gains from taxation.  The other siblings will owe capital gains tax on all their gains. 

[NCperson]

one additional assumption: the sister who lived in the home would also have to satisfy the two year ownership requirement to take advantage of the capital gains exclusion; as long as the home was sold at least two years after Mom passed, this requirement would be satisfied. 

[rjs]

@Kimberlybyrne  What is your question? You stated some facts, but you didn't ask a question. Did the previous replies answer your question?

[Opus 17]

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@NCperson wrote:

one additional assumption: the sister who lived in the home would also have to satisfy the two year ownership requirement to take advantage of the capital gains exclusion; as long as the home was sold at least two years after Mom passed, this requirement would be satisfied. 

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Even if the mother passed less than 731 days before the date of the sale, the sister in residence should qualify for a partial exclusion under the unforeseeable events rule (death of someone for whom the home was a residence).   That's why I said "up to" $250,000.