Probate, Home Sale, Tax Situation

[MonkeyDiaper]

What is the name of your state? We live in New Jersey but the estate is in California.

My wifes father passed away last year (2005) and the estate is currently going through probate. My wifes sister is acting as the executor since she lives in CA. There is a brother in CA also. What tax implications will there be after probate is finished and the three siblings sell the house? The father died a widow so there is no wife. Assuming that the house is worth $X and we divide the $X by 3 does each sibling pay tax on 1/3 of the house value or the gain from when the father died to when we sell the house? Or am I totally missing something?

Thanks....What is the name of your state?What is the name of your state?

 

[ladybg1]

I just closed my dad's estate & it involved selling his house. We had a capital gains tax on the house. It was based on the diff between the value of the house at his death & the selling price 1 1/2 yrs later. Since I had already distributed some of the money in the estate , we each had to pay 1/3. If I had not distributed anything, the estate would have paid the tax & then the balance of the estate would have been distributed. It didn't bother my brother or myself much. We each had to pay a bit more in income tax. I'm not sure what it did to my sister-she never said. It would probably be better to wait to distribute any money untill the end, but hind site is 20-20

 

[MonkeyDiaper]

So if the estate sells the house and then pays the taxes on the gains of the house, the money leftover is then free and clear of taxes and can be dispursed to the siblings without any further tax implications? Do they need to report that activity on the federal taxes anywhere? Aren't red flags thrown up when you send in a return and suddenly you have an additional 100K in your savings account?

 

[Dandy Don]

Just having the money in an account does not automatically throw up a red flag.

Just make sure you consult with a CPA or tax accountant to file your tax returns in a timely fashion and include W2's and Form 1099's for all monies you receive.

If there are enough assets in the estate besides the house, then the estate pays for the tax liability.