Inheriting a Home Tax Question?
My wife and 3 other siblings inherited a home in california 4 years ago, when their mother died. The mother, however had the house in a living trust, so the home is now in the name of the trust. i have a few questions, and am hoping an accountant or real estate professional is on here and can steer me in the right direction. The house only had a 50,000 mortgage on it, and we have been paying that these last 4 years. The house was worth about 290,000 when she died, it is worth 500,000 now. Here are my questions:
1. Do we need to notify the IRS, and if so, are there any taxes involved (or as long as it is in the trust, we are okay)
2. If there is capital gains taxes involved, are they split evenly among the siblings.
3. What are the amounts of capitol gains taxes we might be looking at.?
Thanks in advance, and only knowlegable people in this subject answer. Thanks
One more question. Do we pay the taxes on the amount the home was worth
- Anonymous1 decade agoFavorite Answer
As long as the house is in the trust... no tax issue.
When the house sells... the tax is based on the gain from the date of the death of the mother.
Cap gains tax will be appx 15% of the increase in value.
The trust setup was most likely done such as to prevent the need to pay income tax, or inheritance tax on the value of the house at time of death.
But if the trust was done poorly... there could be more taxes to pay.
- 1 decade ago
for the amount of money you are talking about it would pay for you to contact a real estate attorney or a cpa that is familiar with real estate tax and with living trusts. I do know the answer to your last question and that is you would only pay taxes if any on the gain not the value of the home. The gain would be the difference between what you sale the home for and what it was worth at the time she passed away. But again I would definately contact the professional in this field and pay them for their advice, it will be well worth it.
- SlumlordLv 71 decade ago
Are you sure the home wasn't worth 500k when she died or at least 400k - wink wink (just kidding). Anyhow you will have to pay tax on how much the home has gone up since she died. Capital gains taxes (hey at least its only 15% for long term capital gains) will be split according to the percentage ownership (assuming you each own 25% then its split evenly).
You will have to notify the IRS of the capital gains on the property from after the mothers death (ie you have to put it on your tax return - nothing else). The person handling the estate will also notify the IRS, but thats their problem.
- Anonymous1 decade ago
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