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CGCPA
CGCPA, CPA
Category: Tax
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Experience:  over 40 years experience in tax matters
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My mother passed away in April 2011, then my father passed

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My mother passed away in April 2011, then my father passed away in July 2011. Me and my three sisters were left the house equally. The estate was under $1,000,000.00 so no estate tax was due. My sister is the executrix. We want to put the deed of the house in the names of all four siblings. Is that the correct way to do it for tax purposes (this is NY)? House at time of death was valued at $515,000.00. What taxes will we have to pay if and when we decide to sell house? Some of us still live in house so we would not sell for a few years.
Submitted: 2 years ago.
Category: Tax
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

Deeding the house to all four of you is the correct way to do this. Should the house ever be sold (or if one of you buys the others out) the basis will be 1/4 of $515,000 each or $128,750 each. Any sales price above that will trigger capital gains taxes. However, if one or more of you live in the home as your main residence for at least two of the five years prior to the date of sale there is a gain exclusion of $250,000 to that party ($500,000 if married filing a joint return in the year of sale) which will be deducted from the gain before there is any tax. Then the highest capital gains tax rate is 15%. Although any taxable gain will likely be below that rate, it is always safer to estimate at the highest rates. You are also able to include in basis any improvements made since you took ownership as well as deduct selling expenses (realtor, attorney, etc.)

 

For an example: (per owner)

 

Basis to begin $128,750.

Improvements 12,000

Basis at time of sale $140,750

 

 

Selling price $200,000

Expenses of sale 17,000

 

Adjusted selling price $183,000

Basis at time of sale 140,750

 

Gain $42,250

 

If the home served as the primary residence (see above) there would be no tax since there would also be an exclusion sufficient to reduce the gain to zero.

 

However, laws do change. Tax laws are not different in that regard. You should investigate tax changes just prior to selling the home to be current on the laws at that time.

 

Se

Customer: replied 2 years ago.

How do you calculate improvements? Do you have to keep receipts?


 

Expert:  CGCPA replied 2 years ago.
Improvements are calculated at their actual cost. They will only be the cost of improvements made after you took ownership. You will need to keep receipts to prove the expenditures if ever questioned. Things like replacing windows/doors/roof, kitchen renovations, etc are improvements while things like repainting interior walls are not considered improvements. If the cost is borne by some of the owners but not all of them then the actual cost will not be divided by four but will be recorded only to those actually incurring the cost.
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
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