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First, I assume that since it was you and your siblings that inherited this property, that it was property left to you by your parents. If that is the case, the state of NE allows you to exempt the first $40,000 from inheritance taxes.
The NE inheritance tax is based on the valuation of the property on the day the decedent passed away. So at that time if the property was worth $65,000, that is the valuation you used. Assuming the property was left to you by your parents, the first $40,000 is exempt from NE inheritance tax, leaving $25,000 which is taxable at a rate of 1%. So the total you will owe for NE inheritance tax is $250.
The issue of what you spent for renovations is a separate issue. The IRS does not impose an inheritance tax. However, you do have to pay capital gains tax if you sell a property which you inherited and have a gain from the sale.
When you inherited the property, you were entitled to a stepped up basis, meaning that your basis became whatever the value was of that property on the day you inherited it. So in this case your starting basis was $65,000. Now if you made $30,000 in improvements to renovate the home, that amount is added to your basis, giving you an adjusted basis of $95,000 in the property. If after selling expenses you received $114,000 for the property, then you had a gain of $19,000. This gain is treated as a long term capital gain and subject to a maximum tax rate of 15%.
You and your siblings would each report your share of this gain on Schedule D of your tax return.
The contractor's bill can be paid out of the sale proceeds or however you wish to pay him. But the tax you actually owe is based on the gain you had from the sale as detailed above.
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Thank you debra