My mom passed away leaving a house...

[yongsiklee]

What is the name of your state? Virginia

My mom passed away 3 months ago leaving a house to me and my two other brothers.

She bought it 15 years ago for $100K and all is paid off. The house is now on the market for sale now and we are selling it for $370K.

What is tax implication here?

1. Do we have to pay inheritance tax based on $100K or $370K?
2. Do we have to pay capital gains tax for $270K subject to 15% to 30% tax brackets?
3. Do we have to pay inheritance tax first and then capital gains tax, based on after-inheritance-tax-deduction?

Please, offer me your sincere insights.
I will contact a CPA in a few weeks but I need to have a general idea right now.

 

[anteater]

What is the name of your state? Virginia

My mom passed away 3 months ago leaving a house to me and my two other brothers.

She bought it 15 years ago for $100K and all is paid off. The house is now on the market for sale now and we are selling it for $370K.

What is tax implication here?

1. Do we have to pay inheritance tax based on $100K or $370K?
2. Do we have to pay capital gains tax for $270K subject to 15% to 30% tax brackets?
3. Do we have to pay inheritance tax first and then capital gains tax, based on after-inheritance-tax-deduction?

Please, offer me your sincere insights.
I will contact a CPA in a few weeks but I need to have a general idea right now.

An inheritance tax is different from an estate tax. Virginia has no inheritance tax. Both the federal and Virginia estate taxes exclude the first $2M of estate value from taxation. If your mother's entire estate is less than that, there should be no estate taxes due.

The applicable cost basis number for any capital gains tax is the fair market value on the day that your mother passed away. That becomes your cost basis. (Any major improvements made since then could be added to that cost basis. But that seems unlikely in your case.) Capital gain is the difference between your net proceeds from the sale and your cost basis. Since you are selling fairly shortly after inheriting, you are unlikely to have much, if any, capital gain. In fact, since it is the net proceeds of the sale that are used, you might acutally have a capital loss.

Inherited assets are always considered to have been held long-term. The federal long-term capital gain tax rates are 5% and 15%. Which rate applies depends upon the rest of your income and deductions. I do not know Virginia income tax.

Did you or the estate have an independent appraisal performed? If so, that would provide the documentation for your cost basis. (However, I suspect that if you sell the property quickly, your CPA will tell you that the actual selling price will be a good enough estimate of the fair market value on the date of your mother's death and can be used as your cost basis.)