I agree with my colleagues. There is not enough information to say for sure, but there should be a step-up in basis for the property to the fair market value, as of the date of death. Since the property has apparently been held for three years since that time, any gain would reflect only an increase in value from the date of death. Whether administrative expenses can be used to augment the basis and offset that gain, I tend to doubt. But the costs of modifying, updating and selling the home would certainly count.
Your mother should visit with a CPA or tax attorney to discuss this matter in more detail.
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Please bring this question to a local probate and/or tax attorney who should be able to figure all this out. A cursory glance suggests that perhaps the inventory should be amended to change the date of death value of the property from zero. If you have not had professional assistance to this point, please get some. This can be quite complicated and, as you are discovering, can have large financial implications.
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I am curious how the "0" value was really arrived at. In most situations, inherited property receives a stepped up basis to the date of death value of the person who passed...Depending on what is in the rest of the other probate file, I might suggest getting someone to do an appraisal as of date of death of the daughter to establish what mom's basis is now. You need legal and tax advice, this is not something you can do alone.
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