When beneficiaries inherit real estate, decide to sell the property and keep the money, must they all pay capital gains tax?

Asked over 1 year ago - San Diego, CA

Our elderly mother is the sole owner of a condo in New Jersey. If/when this property is inherited by her four adult children, and the beneficiaries decide to sell the condo and keep the money, are they all liable to pay capital gains tax after the sale?

Attorney answers (3)

  1. Steven M Zelinger

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    Answered . The short answer to that question is yes. However, if you receive the real estate as a result of it passing to you and your siblings at death you get the benefit of a "step up" in tax cost basis. This means that if you sell the property after her death (for example) for 250,000 and it was worth 210,000 at the moment of her death (date of death value), the capital gain would be $40,000. The proceeds would be split and the taxable capital gain would be split in the same proportions (I assume 25% each or $10,000). This is better than the option some families mistakenly fall into which is to have mom gift the real estate to you by deed prior to her death in which case the capital gain would likely be much greater (if she paid $100,000 for it year ago and it was sold after her death, as above, for $250,000 the capital gain wold be $150,000 split 4 ways).

    Also, depending on her residency and the size of her estate, she may also have NJ estate tax issues. You may want to have her visit with an estate planning attorney where she resides to review these issues. I also am usually concerned with long-term care issues for the elderly and she should also have this issue reviewed.

    This is not legal advice nor intended to create an attorney-client relationship. The information provided here is... more
  2. Ronald J Cappuccio

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    Answered . By "inherited" I presume you mean that it will pass as a bequest of her estate. If so, there is a "stepped-up" basis to the fair market value at the date of death. Presuming that the sale is at the FMV, then there would not be any gain. If your mother does not have a Will and Estate plan, she should definitely see a lawyer.

    I hope this helps!

    Ron Cappuccio
    www.SaveYourEstate.com
    856 665-2121

    If you do not like this answer or disagree, please look at one of the other answers provided. It is not necessary... more
  3. Bruce Givner

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    Answered . Yes they are liable for whatever tax might be due. However, given IRC Section 1014, which "steps up" the basis in the property to the date of death fair market value, there is likely to be no tax due.

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