My father just passed away and left his New Jersey home to his children. There are three of us and we all live in New Jersey. The house is valued at $350,000 and will sell for same. His other assets totaled $100,000. I wanted to know how to calculate the capital gains on the property and is there cap gains for federal and the state of NJ?? Also is there any of this inherited money considered income at the end of the year?
The capital gain is based ont he difference between the selling price and the cost basis. Since the house was valued at the same price on his death as being sold, there will be no capital gain. The Cost Basis is auotmatically the value on his date of death.
Inheritances are not subject to tax. Federal or state level.
The estate is subject to tax only if it has assets worth more than $5MM in 2012.
So, based on your bried scenario, it sounds like everything is tax-free! Yeah!
Over 20 Years experience in resolving tough tax cases
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did you nee more info from me? So let me understand, both federal and NJ state will not seek capital gains on the sale of the house?? Either from the estate (since my parents paid $79000 for the house 35 years ago) or his heirs? It is hard to believe...how did we luck out?
And therefore, no other tax (income or any other) from Federal or State will be sought??
There is no capital gain to tax.
$350K selling price minus $350K cost = 0.profit.
When someone dies, the cost-basis of their capital assets is automatically increased to the value on the date of death.
There is NO income tax on inheritances unless it is from a previously untaxed retirement account like an IRA.