sale of inherited house???

[pamraddin]

What is the name of your state (only U.S. law)? Texas

My father-in-law passed away in 2004. As part of his estate, he left a house to his two sons, one of which is my husband. At the end of 2007, the estate was disolved and the house became the joint property of the sons. Last year the house was sold and the profits divided between the two. Will we have to pay taxes on the money received from the sale of the house since it was an inherited property?

 

[seniorjudge]

http://www.irs.gov/pub/irs-pdf/p551.pdf

http://www.irs.gov/pub/irs-pdf/p559.pdf

 

[LdiJ]

What is the name of your state (only U.S. law)? Texas

My father-in-law passed away in 2004. As part of his estate, he left a house to his two sons, one of which is my husband. At the end of 2007, the estate was disolved and the house became the joint property of the sons. Last year the house was sold and the profits divided between the two. Will we have to pay taxes on the money received from the sale of the house since it was an inherited property?

In 2004 your husband and his brother received a "stepped up basis" to fair market value as of 2004.

The sale of the house (1/2 for each of them) must now be reported on their tax returns for 2008. It is reported on Schedule D.

If the house appreciated in value since 2004, you will pay capital gains tax on the difference between the "basis" and the sales price. If the house declined in value there may be a capital loss.

This is one of those situations where it really would be in your best interest to use a tax professional for this year.