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Old 04-18-2014, 12:44 PM
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Inherited House

My sister and I inherited a house. The house is paid for. We are trying to decide whether to sell it or rent it out.

If we sell it, I understand we will be subject to capital gains taxs. The house would sell for more than the stepped up value at the time we inherieted th house.

Could I do a 1031 exchange for my portion of the proceeds where I buy another piece of property with the proceeds of the sale of the house

Thanks



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Old 04-19-2014, 10:44 AM
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Quote:
Originally Posted by gr8smoke View Post
My sister and I inherited a house. The house is paid for. We are trying to decide whether to sell it or rent it out.

#1;If we sell it, I understand we will be subject to capital gains taxs.


#2;The house would sell for more than the stepped up value at the time we inherieted th house.

#3;Could I do a 1031 exchange for my portion of the proceeds where I buy another piece of property with the proceeds of the sale of the house

Thanks
#1;correct; the basis for determining gain /loss on inherited property is the property's FMV on the date of the decedent's death. FMV is the price that property would sell for on the open market. Inherited property is always considered to have a long-term holding period, so you would qualify for the preferential tax rate of 15 % aslongas your marginal tax rate is higher than 15%; if not, your LTCG tax rate is 0%.. It's important to remember that the value at date of death is not reduced by the cost of selling expenses of the inherited property. If you were to pay the customary 6 percent real estate commission, your gain on the property would be reduced by the full commission.


#2;I gusss so due to poor macro economic condition.As mentioned above;it depends on the situations.

#3;I do not think sounless the inherited home was used as investment pty.; your inherited property is 1031 exchange eligible only if you have held it for investment. For a 1031 exchange to work both old and new properties must be held for investment. Or you could move into the inherited home and live there for two years making tha tproperty 121 eligible unless you already have your sec 121 eligible home
1031 ex may not be as good a deal as it appears, because the maximum federal tax rate for long-term capital gains is currently 15% as said unless your agi is over $200k I guess. By paying the tax, you could exchange a 15% tax on the gain for getting depreciation deductions at a higher tax rate benefit, as high as 35%.



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