Good morning. Each of you had an original basis in your house equal to 1/2 of $135,000 = $67,500. You would have increased your basis by any improvements to the property, but not repairs, utilities or mortgage payments. When your best friend died and you inherited his 1/2, the basis in that 1/2 was increased to the fair market value of the property times 50%....so your basis in his 1/2 is now 1/2 of $265,000 = $132,500. So, your taxable long term capital gain = Sale price (less closing costs) in excess of your basis ($67,500 + $132,500 + any improvements you made to the property).
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In your professional opinion should I have a tax attorney file my claim this year vice a CPA? The last person I want to get in trouble with is the IRS.