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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My mother died Sept. She left house to 4 siblings. House

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My mother died Sept. She left house to 4 siblings. House is in Texas. It really needs repairs, due to storm damage. Repairs will raise value. Is Capital Gains Tax a situation for these repairs (windows, flooring needed)? Someone said if house sold within 6 months, there would be no capital gains tax. Does this apply only if no repairs we done? Is Capital Gains Tax really high?
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question. I'm sorry too hear about your loss. Okay. Let's take a look at your situation - you inherited an interest in house. When you inherit the house, your basis is the fair market value of the house on the date of your mother's death, or the fair market value six months after the date of death (if an alternate valuation date is selected by the executor of the estate). In six months, the value of a house typically in a normal market won't change much.

Your basis is the amount you will never pay capital gains tax on. If you sell the house for more than the basis, you will pay capital gains tax on the amount that the sales price exceeds the basis.

Now, your repairs INCREASE your basis - so add that to the fair market value. You will not pay capital gains tax on this money, either.

For example, if you sold a house for $200,000 and the fair market value at the date of death was $150,000 and you did $40,000 in repairs, you would only pay capital gains tax on $10,000.

Capital gains is 15% until the end of 2012, and then it increases to 20% in 2013.

I hope this helps you, please let me know if you need further assistance.

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Customer: replied 4 years ago.

Hi, I have a few more questions. In the example you gave, of the 10,000 that is due to capital gains, the tax is 20% next year. So, $2000 would be paid in capital gains tax? If the house sale revenue is divided up next year, does each sibling pay his or her share of the tax, or is it paid by the estate first?


 


Also, if I did repairs, did you say that it will not subject me to capital gains? So I can do repairs by maybe Feb or March, and whatever the appraised value is then, is still the base value? Does the judge set something?


 


Thanks for your help so far....

Yes, each sibling would pay their part of the capital gain, so $500.

You have the fair market value at the date of death, and then you ADD TO THAT the cost of the repairs. That total is the amount of money you will not pay capital gains tax on.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer: replied 4 years ago.

Mother died Sept. I became executor in Dec. She has some small stocks, which may have accrued interest since she died. I need to do her taxes as well as mine. I want to liquidate and distribute her stocks, but what about doing her taxes? Do I count as her income any interest that accrued after she died? It is a very small amount, if any. Do I have to do taxes on estate, or can I just do taxes for her, and then taxes for myself, including all the interest after she died in mine? It would be a very small amount, if any.