Inherited House: Sell in Estate or Retitle then Sell?

[GrilledTaxes2024]

Sole heir situation Colorado; Inherited family house, it's now 4yrs after death of mother.
Delinquent in transferring ownership but have gotten personal rep. reinstated via lawyer and have two options:
1) Either sell through estate using title commitment via title co. & lawyer and pay capital gains,
2) Use Personal Rep. Deed to transfer ownership into name then sell after 1 yr.*  If ownership is transferred would that be a step up basis sale situation or is the same capital gains scenario equally in affect as option 1?

*Heard that title company's need 1 year ownership for PR Deed to warranty.  ... correct?

Not primary residence renovating for eventual sale.

Thanks in advance.

[tagteam]

The alternatives you proposed are essentially identical; the house will have a basis stepped up to its fair market value on the date of death of your mother. The house is being sold (actually you already own the property if you're the sole heir) out of the estate either way.

[Opus 17]

In both cases, your basis is the FMV on the date your mother died.  If you don't live there as your main home, you pay the same capital gains tax either way, on the difference between the FMV on the date of her death and the selling price.  Under scenario 2, you report 2 different sales, with the 4 year gain in one sale and 1 year gain in the second sale -- is there a reason to think the market will go up so fast that you want to hang on to the house a little longer?  

[Opus 17]

You will have to ask a local real estate professional or title insurance company about the rules they follow, but if the new owner really needed to wait 1 year to sell before they could get title insurance, house flipping would be impossible, or at least very impractical.

However, if you sell the house to yourself (essentially) and then sell it later, if you wait less than 366 days, you probably lose the tax advantage of long term capital gains, and pay a higher short term capital gains tax rate. 

[tagteam]

Frankly, I am not sure why this is an issue as the personal representative is entitled "personal representative" precisely because that person represents the estate and the probate court can authorize the personal rep to convey the property.

Title insurance generally is not time dependent in terms of insurability. 

[tagteam]

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@Opus 17 wrote:

Under scenario 2, you report 2 different sales, with the 4 year gain in one sale and 1 year gain in the second sale......

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I'd say you're somewhat unclear on how property transfer work the type of scenario described.

[tagteam]

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@Opus 17 wrote:

However, if you sell the house to yourself (essentially)..........

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Also which is not a possibility.