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When you inherited the family property, your basis in that property is the fair market value at the date of the death of your relative.
You will owe tax to the extent that the selling price exceeded the basis in the property
So, if you sold it for the fair market value at the date of death or less, there's no tax.
If you sold it for more, then there is tax but only to the extent that the selling price exceeded the basis
There's no withholding required by the executor
If there is a gain, each sibling will only have to pay tax on their portion of the gain
I'm sorry to hear of the loss of your father, by the way.
Let's go through an example. Say the property appraised for $300,000 at the date of your father's death. His 1/3 interest is worth $100,000 - so $100,000 is your basis in the property. You sold it for $99,000 so there's a loss of $1,000. Each sibling will claim $333 of capital loss on their tax return
So I need to know the fair market value when my grandparents originally purchased the home?
No, you need to know the fair market value at the date of the death of your father.
Ok, thanks! That does help. Just in case who can come after us for that information? Will I need to list it on my tax filings?
Thanks for your condolences!
The IRS may ask for that information. You will list the FMV of your portion of the transaction on your tax return on form 8949 and schedule D
Those are the forms where you report the gain/loss on this transaction
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