Tax Issues on inherited property

[shark7711]

My brother and I had a "life estate agreement "with our parents for their condo that expired when both parents passed away.  I am told the the agreement became a "tenents incommon" agreements with their passing.  My brother now wants to purchase from me my interest in the property.

I live in Florida.  What my tax issues for proceeding with this?

[tagteam · Accepted solution]

You need to consult with local legal counsel for this matter.

Typically, you and your brother would take a stepped-up basis (the fair market value as of the date of death of your parents) but there could be other issues that are specified in the agreement, connected with their estate plan, and/or any other superseding document, such as a trust.

If your brother does purchase your (presumably 50%) interest, then 50% of your basis for the entire 100% interest would be the purchase price (the amount you paid your brother, assuming you paid fair market value).

Please consult with local legal and tax counsel who have the ability to review the relevant documents.

[Hal_Al]

Simple answer: there would be no income  tax issues. This assumes you sell  the property to your brother for half the fair market value (FMV) on the date of death.  Then, your cost basis is the same as the sale price and you have 0 capital gain to report.  However the sale would have to be reported, on your tax return, especially if a form 1099-S is issued.  If there are expenses of sale, you may even have a small capital loss to claim. 

This also assumes that you qualify for stepped up cost basis; which is usually the case with a life estate agreement.  As others have said, legal or CPA guidance is suggested.