Legal Question in Real Estate Law in New Jersey

Re: regarding being bought out of the house

If you received your joint ownership as a bequest under a Will of someone who has died, any taxes would be paid as part of administering the Estate. Who pays the taxes depends upon what the Will says. However, if you are a lineal descendent (i.e. child, grandchild, etc.) there is no inheritance tax no matter how large the Estate. If it was worth over $675,000.00 there may be Estate tax again depending upon your relationship to the decedent but the highest rate is 16%.

Your friend is no doubt thinking about Capital Gains tax which doesn't apply here and even in that calculation, is wrong. Capital Gains are taxed at 40% of ordinary income and that's where the friend probably got the $40,000.00 figure. However, it depends upon your tack bracet. If you are in the 15% bracket, your Capital Gains would be taxed at 40% of that or 6%.

See a lawyer experienced in Probate law to make sure you are doing everything correctly. For a $100,000 bequest, it makes sense to pay a few hundred dollars to make sure there are no problems.

Re: regarding being bought out of the house

You do not say from whom the house was inherited or if the estate was subject to death taxes. These are critical answers to properly advise you. Presuming the house was left to you by a parent, it is possible that you owe no or minimal death taxes, the amount of which is determined by the size of the entire estate. If left to you by a more remote or non-relative, it is possible that death taxes in NJ could be 15% of the value. This presumes the estate is not subject to federal estate taxes, which could be considerably higher. There would be no federal or state income taxes, as your "cost" for determining gain would be the date of death value of the decedent. Presuming you sold the house for the same value, no gain is recognized. At worst, if you sold it for more than the date of death value, you would be subject to federal taxes as a capital gain (maximum of 15%) and state taxes at whatever rate your total income produces. These are general answers and an exact response would require more information.