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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10172
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Are taxes owed on a property titled in father,

Customer Question

Are taxes owed on a property titled in father, son&daughter's names when father passes. He lived in house 2 of last 5 years but spent last 2 years in care home and rented his home to pay for care.
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: All colorado residents and no other reale estate sales.
Submitted: 4 months ago.
Category: Tax
Expert:  Mark Taylor replied 4 months ago.

Hi, my name is Mark. I will be happy to help you with your questions.

Expert:  Mark Taylor replied 4 months ago.

Are you trying to see what potential capital gains would apply if the property is sold?

Expert:  Lane replied 4 months ago.

Hi - You said "..no other eal estate sales," so I'll assume that this is a sale of property partially inherited (and partially already owned by the son and daughter before death, as you indicate)

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Yes, if the property was sold after death, the portion that you inherited from your father (sounds like 1/3rd if there was just one son and one daughter) will receive a step up in basis to the date of death fair market value,... so that if the property was sold fairly quickly, there would be no gain on THAT PORTION of the sale.

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However, the tax basis on the portionof the property that was already owned by the son and daughter will generate a gain in the amount of the difference between sales price and your original basis.

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You original basis would depend on how you became part owners of the property. If you were simply gifted that portion of ownership (say, your father simply placed you on the deed) then your basis is what's caled "carry-over" basis - the basis of the persong giving you the property simply carries over to you.

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If you PURCHASED your owership from your father, that portion that you owned before death would have a basis equal to your purchase price.

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(Capital Gain = Sales price - basis) ... And again, basis depends on how you came to own the property.

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To recap -

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Inherited property gets the fair market value of the property inherited (as of the date of death of the person leaving the property) - Again this is called stepped-up basis.

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Purchased property carries the purchase price as it's basis

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Gifted property's basis flows to the gift recipient from the giver (so many times the pruchase price OF the person giving the property ends up being the gift recipient's basis)

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Expert:  Lane replied 4 months ago.

So, although there will be gain, there will not be as much as there would be if your father had gifted 100% of the property to you during his life.

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In that scenario, your gain would be exactly the same as his if he sold it during life. This way, (becasue of the ste-up in basis that comes with inherited assets) you are getting a step up in basis on the 33% of the property that your father owned at his death.

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From a capital gain on sale perspective, the ideal would be for your father to have left the ENTIRE property to you at death.

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The next best scenario would be if you had PURCHASED your interest from your father, so that your basis would be (rather than HIS carry-over basis) your purchase price ... less gain that assuming HIS basis, which is what happens with gifts.

Expert:  Lane replied 4 months ago.

Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Expert:  Lane replied 4 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help? (If so, … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... If you need more here, please let me know.

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Let me know…

Lane

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