Tax on property sold as a result of inheritance
I have three siblings. My mother is very old and in failing health. We are trying to convince her to sell her home and estate now and gift it to the children so that we will not have to pay tax on income from the sale of the home. She wants to wait and have us inherit the estate when she dies. We believe if we receive the estate as inheritance and then sell it immediately, we will have to pay tax on the income from the sale. Would the income from the sale of an inherited home be taxable to those who inherited it? Would each child be responsible for his/her tax on the portion of the sale he/she receives? The home and estate is worth about $400K.
1 Answer from Attorneys
Re: Tax on property sold as a result of inheritance
Based on a stated estate value of $400K there would be no federal estate tax liability. For income tax purposes, if you wait until our mother dies the children will receive a fair market value as the basis. An immediate sale woudl then generate little or no taxable gain. (Totall selling price - basis = taxable gain )If there is any taxable gain it would be shared amoung the beneficiaries. You did not let me know the state where mother resides. If in Florida, there are no state inheritance tax implications. However, there may be medicaid implications if medicaid nursing home facilities are required in the future. This may pose a much larger problem than any income tax assessed on a sale. Your mother really needs to consult with an elder law attorney to protect your mother's assets (and your inheritance) from potential state medicaid recovery liens.
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