On the show today, we had a call from someone who wanted to know about selling a home his Dad owned in California. The son, a resident of Georgia, is the executor of his father’s estate.
The son wanted to know how selling the property would affect his taxes. His father’s total estate is worth less than $1 million. The property had been on the market for $399,000, which is the price that the agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state. had valued it at on the day of death, but that was 9 months ago and the house hasn’t sold. So, the agent wants to lower the price of the property to around $300,000 to hopefully get it sold.
Would the son owe taxes? I said no. He would inherit the property (and the estate) estate tax free. When he sells the property, he’d keep the proceeds without owing any additional taxes.
I did suggest he might want to hire a tax preparer in California (or an enrolled agent www.naea.org) to help him with whatever paperwork he needed to file.
Here some additional information from John Donovan, an enrolled agent in Alpharetta, GA:
I am one of only two listed in Alpharetta , GA 30022. You are correct; your caller will not have any taxes due for his inherited house. Technically the IRS requires an appraisalAn Appraisal is the opinion of an appraiser, who estimates the value of a home at a specific pointA Point is one percent of a loan amount. in time for the purpose of financing or refinancing a home.. I paid $250 for a house and $250 for an apartment building with 9 units for my nieces.
He may not have any problem without an appraisal if the house is sold near the date of death. None of my clients have ever gotten an appraisal. When I prepare the taxes the client has a long term capital lossA Capital Loss is the loss taken on the sale of stocks, bonds, real estate, or other assets.. Inherited property is always considered long term. The long term capital loss arises from the sales commission, improvements, repairs, & mileage etc. The loss is reported on a Schedule D.
p.s. My favorite gift card is an I bondA Bond is a government's (federal or municipal) or a corporation's obligation to repay you your principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. plus a certain amount of interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. over a fixed period of time. currently earning 5.64% at the bank or treasurydirect.gov.
November 23, 2008