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Ray, Lawyer
Category: Real Estate Law
Satisfied Customers: 39462
Experience:  Texas Attorney for 30 years dealing in real estate
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My Mother passed aseay leaving her house to my Brother and

Customer Question

My Mother passed aseay leaving her house to my Brother and I. I live in DC, he lives in NC. The house is in MD. The title company says we have to pay sales tax/witholding tax on the property. Are they really talking about capital gains taxes? Also can I change the title to the house to read the Estate of my mother so there won't be sales tax? Very confused. Settlement is this Friday.
JA: Because real estate law varies from place to place, can you tell me what state this is in?
Customer: The house is in Maryland. I live in DC and my Brother lives in NC.
JA: Have you talked to a lawyer yet?
Customer: Just the title company. Not sure if when they referred to taxes if they mean sales/whigholding or capital gains (which there is no campital gains.
JA: Anything else you think the lawyer should know?
Customer: I have power of attorniey and am the executor of the Estate. My Brother has given me POA so he does not have to drive to MD for settlement. Register of wills put the house in her estate, but the deedd was never changed to read Estate of. It was willed to my brther and I.
Submitted: 8 months ago.
Category: Real Estate Law
Expert:  Ray replied 8 months ago.

Hi and welcome to JA. Ray here to help you today.

Maryland has a state estate tax , this may be what they are referring too.

The Maryland estate tax is a state tax imposed on the privilege of transferring property. Simply stated, the tax consists of an accounting of everything a decedent owned or had certain interests in at the date of death. The tax is administered and collected by the Comptroller of Maryland and is due within nine (9) months after the decedent’s date of death. See the MET-1 Estate Tax Return and the links below for more information.

The Maryland inheritances tax is a tax imposed on the privilege of receiving property. The tax is collected by the Register of Wills located in the county where the decedent either lived or owned property and is not due until the property is distributed from the estate. For more information, contact the Office of the Register of Wills.

Under current law, an estate with a gross value of more than $2 million may owe the Maryland estate tax. By contrast, federal estate tax returns are required only for estates of more than $5.45 million for deaths in 2016. The top state estate tax rate is 16%, you owe no federal estate taxes here federally unless it is over $5,450,000 it is the Mryland state taxes here.

You only owe capital gains if the value of the property has increased from date you inherited until date you sold, and only that increase is taxable as gain here.That is totally separate and due on your federal return next year and only for your share of any gain here.It is possible for the deceased to file a final tax return, claim the federal exemption for capital gains if she meets the criteria.This would save you capital gains here.You would have the 1099 issued by lender under the EIN number for the estate and file the return claiming that under the EIN number for the mother on last return.

But here likely they are charging you Maryland Estate State taxes, they are one of last states to still have this.

I appreciate the chance to help you today.Thanks again.