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tvcjvc
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What are the tax implications from inheritance of property

My mother had a revocable trust, when she passed away, she left all of my siblings and me both cash and property.  Regards to the property.  There are 8 siblings, 6 want to keep the property while 2 siblings want to sell.  If an LLC is formed to "take over" the property and the 6 siblings purchase the other 2 siblings shares, do the 2 siblings who received their "interest" in the property have to pay taxes on the funds?  By the way, the property was appraised for 375k, the 2 siblings have graciously decided to "sell" the house to the other siblings for 225k.  Thank you for any assistance.
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What are the tax implications from inheritance of property

OK, the gain or loss should be minimal if sold soon. That is because the value of each of the 8's share is the fair market value on date of death.

So, $375K divided by 8, each person would have a basis of approx. $46,875 in the property. 

So when they sold it, if they got more than that it would be a long term capital (due to being inherited), now if they sell at a loss to a related party, then the loss would not be deductible.

So you can see the 2 that sell, will have to report the sale but the tax impact on their respective returns should be $0. 

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3 Replies

What are the tax implications from inheritance of property

OK, the gain or loss should be minimal if sold soon. That is because the value of each of the 8's share is the fair market value on date of death.

So, $375K divided by 8, each person would have a basis of approx. $46,875 in the property. 

So when they sold it, if they got more than that it would be a long term capital (due to being inherited), now if they sell at a loss to a related party, then the loss would not be deductible.

So you can see the 2 that sell, will have to report the sale but the tax impact on their respective returns should be $0. 

tvcjvc
New Member

What are the tax implications from inheritance of property

Thank you for the information.  May I ask a follow up question?  If the 6 siblings "simply" bought out the other 2 siblings without forming an LLC by writing a check to the 2 siblings in the amount of 28,125 (225,000 divided by 8), could the 2 siblings take a capital loss because the property appraised for 375k?

What are the tax implications from inheritance of property

No capital loss due to selling at below Fair Market Value to related party.  Positive thing, it stays in family and no gain to report and still get $28,125.
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