Thank you for your question. My name is XXXXX XXXXX I will be happy to assist you today
I'm confused a little because you said that your in laws paid income tax on the inheritance of a house, because you never pay income tax when you inherit a property
You only pay income tax when you sell the inherited property (and then, it's capital gains).
Hmm.... I don't know about that either.
But, your basis is equal to their basis. Their basis is the fair market value on the date of death of the person they inherited the property from.
So, based on your question, it would be the fair market value 10 years ago when the house was inherited.
OK. I think that answers my question, then.
Your gains would be the amount by which the sales price exceeds that basis
So even though they only paid $36K for it, the basis would be $90k?
And we'd pay capital gains on the difference between what we get for the house and 90K?
They didn't pay $36,000 for it, the grand parents did-right, and then when the grandparents died, that's when they acquired the home?
They did not acquire the home while the grandparents were living
that is correct.
Okay then, that is correct. Even though the house was purchased for $35K, the basis is based on the fair market value at death
It's called a "stepped up basis"
Oh - my in-laws payed inheritance tax I just found out.
Not income tax.
It must not be a federal tax.
What state are you in?
OK. So what do we need in order to prove the value at the time of inheritance?
When the parents paid an inheritance tax, it was based on something - the fair market value of the property
If they have proof that's what they paid tax on, there's your proof of value
My in-laws are flaky, so there is no telling what the actual tax was called.
Sweet - thank you! So to pay the $30, how do I do that?
You rate my response as positive (3-5 smileys) and that processes payment
OK. Have a good evening!