Selling Inherited Home

Today TaxMama hears from Jami from California in the TaxQuips Forum, who has this question.  “My aunt left me her condo and I have to sell it. The deed passed to me a week after I turned 55. Will the 55 & over real estate rule apply to me when I file my tax return?”

Dear Jami,

 Sorry to learn about your aunt dying.  But how sweet of her to leave you her condo.

 It’s not clear to me what over 55 rule you’re talking about? Never mind.

Here’s how it works.  You need to get an appraisal for the value of the condominium on the date of your aunt’s death. That will be your ‘basis’ or tax cost when you sell the condo.  It’s possible that the executor of the estate has already done this. Please find out.

When you sell the condo, your gain will be based on the sales price, less selling costs, less the basis at date of death.

If you lived in the condo with your aunt for at least two full years out of the last five years, you will also be entitled to the $250,000 exclusion of profits since the condo was your personal residence. But you probably won’t need that.  There won’t be a gain if you sell it in the same year your aunt died. The real estate market isn’t that strong in California these days.

If you didn’t live in it…try to sell the condo THIS YEAR.  The capital gain rate for IRS may be as low as ZERO.

California doesn’t have any special rates. So your gain will be taxed at 9.3% or less, depending on your tax bracket. If there is a gain at all?

 And remember, you can find answers to all kinds of questions about inherited assets, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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