Legal Question in Tax Law in California

Re: Inheretance tax

First off, how did the assets come out of your Grandfather's estate? Was it through a trust that has been administered and closed, was there a will that went through probate, or were the assets in some other form of probate avoidance technique (i.e. was it all in a checking account that was owned jointly with your Father, or an IRA with a designated Beneficiary of your Father). Since the assets are as high as you described, they should have passed through one of these techniques, for if these assets are still in your Grandfathers name, then you will probably have to file probate.

Assuming all the assets have legitimately transferred to your Father, then there is the tax question. If all your Grandfather had was 167,000 dollars in assets, and he was a US Citizen, then most likely there is no estate/inheritance tax. Also, assuming the assets as you described them, were not in a special tax deferred vehicle (such as an IRA or a 401K), then they all most likely stepped up in basis at the death of your Grandfather. Meaning that you likely will not have to pay any taxes, income or inheritance (except for the appreciation since your Grandfather's death), when you turn the assets in to make the downpayment.

I hope this helps.