In 2000 my parents transferred their house and land to my brother and I for $1, with a Full Rights Of Survivorship deed. My brother died in 2023 and I am in the process of inheriting his estate (sole beneficiary) . With the approval of the estate lawyer I sold the house and land for <$250K. I haven't lived in that home for many decades, and my brother lived there, paid the taxes, updates, maintenance, etc. What are my federal tax implications, as well as for the state of Michigan, when selling a property I already half owned and just inherited the other half?
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Because your parents gifted you and your brother the house and property, your cost basis in the first 50% you received is the same as your parent's cost basis. Your brother's half of the house and property received a step-up and basis, which means the cost basis for that 50% is the value of the property on the date of your brother's death. It was not your primary residence for two out of the last five years, so you are not eligible for any exclusion of gain. You will need to determine your parent's basis in the house and property - what they paid for it (assuming they bought it) plus the costs of any improvements (e.g. additions, remodeling, etc.) The cost basis of the property sold by the estate should be close to, if not the same as (50% of) the sales price. Any loss is not deductible. Any gain will be a long term capital gain. The amount of gain will be included in your Michigan taxable income.
To report your gain in TurboTax:
Because your parents gifted you and your brother the house and property, your cost basis in the first 50% you received is the same as your parent's cost basis. Your brother's half of the house and property received a step-up and basis, which means the cost basis for that 50% is the value of the property on the date of your brother's death. It was not your primary residence for two out of the last five years, so you are not eligible for any exclusion of gain. You will need to determine your parent's basis in the house and property - what they paid for it (assuming they bought it) plus the costs of any improvements (e.g. additions, remodeling, etc.) The cost basis of the property sold by the estate should be close to, if not the same as (50% of) the sales price. Any loss is not deductible. Any gain will be a long term capital gain. The amount of gain will be included in your Michigan taxable income.
To report your gain in TurboTax:
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