Legal Question in Wills and Trusts in Texas

Re: Are Capital Gains Taxes Due on Inheritance?

You would owe no income taxes of any kind on the inheritance.

Re: Are Capital Gains Taxes Due on Inheritance?

You should really run this by a CPA that does a lot of estate tax work.

If I recall correctly, the basis for the land stepped up to its value as of the date of your father-in-law's death if it was transferred to you. Any increase in value from that date, or the value six months after his death (your choice), would be subject to capital gains. If she sold the land before it was transferred to you, the estate may have to pay capital gains over the basis when the land was purchased.

Note that I am not a tax lawyer, nor do I pretend to be one on TV.

Re: Are Capital Gains Taxes Due on Inheritance?

If the sale of the ranch is greater than your basis, then you have taxable gain which must be reported on Schedule D. Different circumstances dictate the method of valuation, but generally, the fair market value (FMV) of the property on the date of the decedent's death is your basis. Thus, if the sale's price is greater than the basis on the date of decedent's death, there is taxable gain.