The good ole IRS looks at the home value on the day of the parent’s death. It does not matter if the home is paid for or has been in the family for 100 years. The children’s cost-basis will be based on the fair-market value.
Well what is cost basis? And what does it mean to me? Cost basis is a tax term for the dollar amount assigned to a property at the time it is acquired, for the purpose of determining gain or loss when it is sold.
Let’s say there are two children, and one of them sold their share of the property to be divided equally, she or he must pay the capitol gains tax for whatever profit made over the one-half of the new basis. You also have to factor estate taxes. If your estate is worth less than $675,000 you don’t have to worry about the death tax. There is no “death tax” in 2010, I hate to say it but, it’s a great year for the rich to pass away. It comes back in 2011.
A quit-claim deed is used a lot when a transfer of ownership taxes place between family members. One of the children might “buy out” the other. All the applicable parties must agree to lose one of the names from the title.
Please refer back to your tax attorney before making any decisions on this matter of inheriting a house.
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