Estate Law Questions? Ask an Estate Lawyer.
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Can you tell me what state this is in?
Did grandfather have any debts when he passed?
Has the house already been transferred to you and brothers from the estate?
Ok, when you inherited the house, you would receive it at a "stepped up basis" equal to the fair market value of the house at the time of grandfather's death. The basis is what the IRS considers your cost for any capital gains. So if the house was appraised at $500K at the time of his death, and you sell it for $550K, then you would have long term capital gains taxes on only the $50K of gain.
But normally, if a sale occurs within 6 months of the death, then the sale price is considered fair market value so there is no capital gain that is taxed and you would divide the proceeds tax free.