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New Member

Is the money received from the sale of inherited property taxable???

Capital gains

Employee Tax Expert

Is the money received from the sale of inherited property taxable???

@Makeitmore Gift tax (if any) would be paid by the person making the gift, not the receiving person.

 

Inherited property receives a stepped-up basis to the Fair Market Value (FMV) at the date of death. You would pay capital gains on any appreciation the property might have had from the date of death to the date of the sale. Generally, if you have sold the property close to the date of death there won't be much of any capital gain taxes to be paid. However, you do report the sale - gain or not. See below for reference.

 

IRS overview of Stepped-Up Basis

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Level 15

Is the money received from the sale of inherited property taxable???

Q.  Is the money received from the sale of inherited property taxable?

A. Simple answer: No.  But, taxes aren't simple.  What may be  taxable is the "capital gain" on the sale of the property.  The capital gain is the difference between what you sold it for and the cost basis. Cost basis is usually what you paid for the property. But, in the case of inherited property, cost basis is the fair market value on the date of death.

 

Q.  Do I have to pay taxes on the $24,333.73 (cash to seller) that I received from the sale?

A. No.  That is not your capital gain.  You sold it for $27,000 (your half of $54,000).  After expenses of sale you netted $24,333.73.  Your cost basis was $37,500 (half of $75,000).  You did not have a capital gain. You had a capital loss of $13,166 (37,500 - 24,334 = 13,166).  You get to deduct the capital loss on your tax return**.

 

**A capital loss on personal use property is not deductible.  Most inherited property, even your parent's home,  is considered investment property unless you (the heir) used it for personal use.

 

New Member

Is the money received from the sale of inherited property taxable???

There is nothing I've ever found in tax code saying original owner.

I have in fact seen the word owner only.

The cost basis is always bumped up to reduce tax liability.  That is the exact purpose from Congress.

Not once but every time.

Income received in trusts are taxed 

New Member

Is the money received from the sale of inherited property taxable???

I disagree totally.  The assets cost basis is bumped up on the date of the owners death. 

That is Congress intent to limit liability.

I have only seen in tax code the word owner.

Some people think it's original owner.

What's the point of limiting the liability once. It also limits the amount you can right off as a loss.

Show me the code.

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New Member

Is the money received from the sale of inherited property taxable???

Absolutely wrong.  It is theFMV of the new owner

Tax code says owner not original.

The whole purpose from Congress  is to limit liability on the beneficiary.

What your saying is limiting it on the first beneficiary.  Again nothing in code states this.

Subject to interpretation. Be

Employee Tax Expert

Is the money received from the sale of inherited property taxable???

You do not pay tax on the full amount that you received.  You pay tax only on any gain from the transaction.  The gain (or loss) is calculated by subtracting your net proceeds from the Fair Market Value (FMV) of the property.

 

The FMV that you will use is the value of the property on the date that you received it (if it was transferred prior to her death, as a gift) or the date of your mother's death (if inherited.)  

 

You should contact a real estate professional for some guidance in determining the approximate value.  Once you have determined the FMV, here is how you will report the sale in TurboTax:

 

  1. Login to TurboTax.com
  2. Click on Wages & Income (you may need to first click on "Take me to my return" or "Pick up where you left off."  
  3. Scroll down to the section Investment Income.
  4. Click on Show More.
  5. Click Start beside Stocks, Mutual Funds, Bonds, Other.
  6. Indicate that you did not receive a 1099-B.
  7. Proceed through this section of the program selecting Second Home when asked What type of investment did you sell?  
  8. Enter the data requested by TurboTax (report only your share of the proceeds and an equal portion of the basis).

If there is a loss on the property, it will not be deductible.

 

Please accept my condolences on the loss of your mother.

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