“ For tax purposesI've been advised not to sell untill after my mom's death because the house would be valued on the date of her death.”---->I am sure that your mom is NOT subejctt o federal/ state estate(inheritance) tax due to the presence of unified wealth transfer tax credit. In its current form, the estate tax only affects the wealthiest 2 percent of all Americans. As you can see, whenever you inherit property, that inheritance then becomes your property(Instead of the fair market value at the date of death, the personal representative for the estate could choose to use an alternate valuation date six months later. Hoever, this is done ONLY when the value of the estate assets has declined and the estate tax liability can be reduced by choosing a later valuation date). If you sell the property for a financial gain, you will have to pay capital gains taxes on that piece of property. Even though it might sound like a losing proposition for those that inherit property, you do get one advantage when it comes to selling inherited property. When yiur mom dies and passes property onto you, the cost basis of that property then changes. The cost basis will change automatically to the fair market value of that property on the day that mom died. Therefore, you are essentially getting around paying for any capital gains taxes on the appreciation that occurred during the lifetime of the deceased.For example, let's say that you inherited $670,000($502,000 +$168,000) worth of pty. that was originally purchased at $10,000. Whenever you receive it as an inheritance, the cost basis is going to change to $670,000, NOT $10,000. If you sold it for that amount, you would have no Gains taxes to worry about. If you sell it for $770,000, then your lTCG is $100,000($770,000-$670,000) and as long as your marginal tax rate is lower than 25% in 2011, your CG tax is $0. If yur tax bracket is higher than 15%, then your CG tax liability will be $1,5000; $100,000*15% in 2011.ALSO REMEMEBR: the house that your mother gave you when she died is a primary residence. That’s good news. When you sell it as your primary residence, thenyou will be able to keep up to $250,000 in profits tax free, or up to $500,000 if you’re married. So, even though your tax bracket is higher than 15%, you STILL do NOT pay any CG tax, $1,5000, in this particular example, due to LTCG tax exclusion rule. However, if you rent it out as a rental property, you can turn a rental house you own into your primary home, and, by doing so, make the sale eligible for the tax exclusion. If it suits you, you can move into your rental house, live in it for two or more years, and then sell it and pay no tax on your gain if it’s under the exclusion limits.Then you can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived in the home for a minimum of two years. You can use this 2-out-of-5 year rule to exclude your profits each time you sell or exchange your main home.
Last edited by Wnhough : 09-23-2011 at 03:40 PM.