Transfer on Death and Tax Basis
REM #F809
By Ilyce R. Glink
Summary: A woman asks how her friend can transfer his apartment to her on his death and what the tax basis will be if she chooses to sell the place. If a property is transferred on death the tax basis is the value of the property on the day of the transfer. If the new owner sells the property right away she will pay no tax.
Q: My friend wants to leave his apartment to me in his will with the lowest tax liabilities possible if I decide to sell it. What is the best way to do it? My husband and I are not planning to live in it.
A: If you inherit the property, you'll probably be able to turn around and sell it immediately without paying any taxes. That's because you'll inherit this property at the then current market value on the day of your friend's death. If you turn around and sell it, you'll be selling it for what is considered the new cost basis for the property, and so you would not pay any federal income taxes on the sale.
If your friend's estate is larger than the current amount he can pass down tax-free, the estate would pay any taxes owed, not you.
NOTE: Ilyce R. Glink's latest ebooks are "Credit Scoring Secrets" and "How to Find a Great Real Estate Agent," which are available at her new, all-video website, www.expertrealestatetips.net. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com ©2008 by Ilyce R. Glink. Distributed by Tribune Media Services.
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