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blaylockgang
New Member

My siblings and I sold our deceased mother's home. Do we have to pay capital gains on it?

My brother and sister and myself were on the title and did not live at the address.

2 Replies
Hal_Al
Level 15

My siblings and I sold our deceased mother's home. Do we have to pay capital gains on it?

We're assuming that, a few years ago,  your mother put you on the deed of the home she already owned*. That was a gift. The usual rule, for a gift, is that the recipient's basis is the giver's basis (what you mother paid for it), not the FMV at the time of the gift.  But there is an exception for the gift of her home, where she retained the right to live there ("life estate"). (seehttp://www.njelderlawestateplanning.com/2010/02/articles/estate-and-inheritance-tax/life-estates-est... which states in part "If you give away an asset and keep a life estate in that asset..... the cost basis of the house is "stepped-up" to the value of the house on date of death [IRC 2036]")

More info: http://www.law.cornell.edu/cfr/text/26/20.2036-1

*Your cost basis would be different if you, and your siblings, bought the property with her originally.

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Sale of Inherited Home

Sales of real estate are usually reportable on your tax return, especially if a form 1099-S is issued. There will most likely be no capital gain and therefore no tax, if the house  was sold shortly after being inherited. Any capital gain would be on the difference between what the house was worth on the date of the decedent's death (your "cost basis" as discussed above) and what the house sold for. If you made any improvements, those costs would be added to your cost basis in determining the capital gain or loss. 

If the house  sat vacant since being inherited, it was "investment property", and, you can deduct the loss, if the house was sold at a loss. 

If there was personal use, by you or your siblings, you are not allowed to deduct a capital loss

CarolynM
Level 1

My siblings and I sold our deceased mother's home. Do we have to pay capital gains on it?

Yes, you pay capital gains, but you get a stepped up basis on the initial cost.

If you didn't own the home until she died, you each get 1/3 of the fair market value  (FMV) at the time of her death. You can use county tax records to determine this amount.

If you all went on the title before her death, you will average the FMV from the date in which you were added to the title and the FMW at her death. 

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