Legal Question in Wills and Trusts in California

I assume you mean that once your father dies and the house is ready to be distributed from the Will/estate, can you then buy out he portion. What you pay her is definitely taxable, but the basis your father has for income tax purposes on the house is stepped up to the fair market value of the house on your father's death. So unless there is an increase in the value of the house, there is no net capital gain to be taxed.

Your question is far from clear, and thus you need to consult an attorney to make sure that the anticipated estate plan is carried through to fruition.

One approach to answering your questions is to describe the transaction as you receiving the entire house upon your father's death, and in turn, you reimbursing the estate for 1/2 of the value of the house. This 50% in liquid assets is then distributed to your sister. Or another possible approach is for you to receive the house upon your father's death, and your sister receiving an equivalent value in the form of other estate assets.

This should balance any estate taxes, and avoid any property reassessments.

However, since so few facts are provided, you should not rely upon this answer (it is only provided to possibly clarify or identify the issues), and instead discuss this in further detail with an attorney of your choosing.

Sincerely,

Kai H. Wessels, Esq.