Inherited home, tax ramifications?

[Warped]

What is the name of your state? VA

My mother passed away in September of this year (2004) and left me her home and 1/3 interest in another home that she owned. The second home is assessed at $62.4k but the market value is in the neighborhood of $75-$80k. My brother was bequeathed the other 2/3 interest in that home with the understanding that it is to be sold within one year of her passing and all proceeds after paying off the mortgage are to be divided between my brother and myself. Her will is currently in probate and I am the nominated and named (by the courts) executor of her estate. My questions are...

1: The home that she left to me is assessed by the city for tax purposes at $92k. What, if any personal tax ramifications can I expect other than the quarterly personal property taxes? Is there an inheritance tax I will have to pay now or at the sale of the home if I ever sell it? I like to file my taxes ASAP after receiving my W-2 form so I'd like to be prepared.

2: If I buy out my brother's share of the second house, what is his tax responsibility, if any? What about my inheritance tax responsibility on that house?

3: If I sell the second house to a third party and my brother and I do split the proceeds, what are our individual tax responsibilities?

4: I recall reading somewhere that unless an inheritance exceeds $500k, there is no tax liability, is that true?

Thanks in advance for any help!

 

[Rhubarb297]

What is the name of your state? VA

My mother passed away in September of this year (2004) and left me her home and 1/3 interest in another home that she owned. The second home is assessed at $62.4k but the market value is in the neighborhood of $75-$80k. My brother was bequeathed the other 2/3 interest in that home with the understanding that it is to be sold within one year of her passing and all proceeds after paying off the mortgage are to be divided between my brother and myself. Her will is currently in probate and I am the nominated and named (by the courts) executor of her estate. My questions are...

1: The home that she left to me is assessed by the city for tax purposes at $92k. What, if any personal tax ramifications can I expect other than the quarterly personal property taxes? Is there an inheritance tax I will have to pay now or at the sale of the home if I ever sell it? I like to file my taxes ASAP after receiving my W-2 form so I'd like to be prepared.

2: If I buy out my brother's share of the second house, what is his tax responsibility, if any? What about my inheritance tax responsibility on that house?

3: If I sell the second house to a third party and my brother and I do split the proceeds, what are our individual tax responsibilities?

4: I recall reading somewhere that unless an inheritance exceeds $500k, there is no tax liability, is that true?

Thanks in advance for any help!

You need to go see an estate attorney or an accountant. You're mixing up several kinds of taxes.

No. 1 most likely refers to property taxes and yes you would have to pay that as long as you owned it.

No. 1 also refers to, I suppose state inheritance taxes. Yes, you might be responsible for that. Depends on your state.

No. 2 and No. 3 depend. I'm assuming from the language you're using that the properties was bequethed to you from the estate. If that's the case, you received a "stepped up basis" (accountants and lawyers will know exactly what this means) in the property so when you go to sell your share of the property, for capital gains purposes, the sales' price is compared to the value of the property when you inherited it. Thus your "profits" on the sale(s) for which you might have to pay capital gains, wouldn't be that much.

No. 4 I believe refers to the federal estate tax. I do believe the limit now is $1 million dollars. So you may not owe federal estate tax. But that doesn't mean you don't owe other types of taxes.

Again spend a few minutes with an accountant or estate (or tax) attorney. You need good legal advice.

 

[abezon]

1/4. Assessed value is irrelevant. Get a real estate agent to do an appraisal for both houses. You can use estate funds to pay for it. Should be $50-100/house. The appraised values are your bases in the houses.

Property taxes are the responsibility of anyone on the deed. You appear to be well below the estate tax limit of $675/1.3M. (Some states adopted the federal $1.3M exemption; others have kept the $675,000 old exemption.)

2/3. Your tax liability is limited to any profit you make from the estate's assets. For example, if you sell house A for $20,000 net over the appraised value on your mother's date of death, you would pay taxes on $20,000 of net income. However, net income is the selling price - costs of sale - appraised value on mother's date of death. If the house sells quickly, this is often a loss. As long as you did not live in the house as your personal residence, you can even claim the loss as a capital loss on your taxes. You'll need to find a tax pro who can handle estate taxes (Form 1041).

If you buy out your brother, his capital gain is the selling price - his 1/3 basis - costs of sale. He may or may not have a profit from the sale.